Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | Apr. 27, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | OVERSTOCK.COM, INC | |
Entity Central Index Key | 1,130,713 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 24,995,269 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 136,415 | $ 183,098 |
Restricted cash | 355 | 430 |
Accounts receivable, net | 21,615 | 28,142 |
Inventories, net | 17,726 | 18,937 |
Prepaid inventories, net | 2,738 | 2,112 |
Prepaids and other current assets | 11,789 | 11,654 |
Total current assets | 190,638 | 244,373 |
Fixed assets, net | 137,296 | 134,552 |
Precious metals | 9,946 | 9,946 |
Deferred tax assets, net | 66,351 | 56,266 |
Intangible assets, net | 10,099 | 10,913 |
Goodwill | 14,698 | 14,698 |
Other long-term assets, net | 12,273 | 14,328 |
Total assets | 441,301 | 485,076 |
Current liabilities: | ||
Accounts payable | 86,089 | 106,337 |
Accrued liabilities | 81,417 | 96,216 |
Deferred revenue | 40,187 | 41,780 |
Other Long-term Debt, Current | 3,267 | 3,256 |
Other Liabilities, Current | 1,604 | 1,627 |
Total current liabilities | 212,564 | 249,216 |
Long-term Debt, Net | 43,921 | 44,179 |
Other Long-term Debt, Noncurrent | 11,003 | 11,831 |
Other long-term liabilities | 6,840 | 6,890 |
Total liabilities | 274,328 | 312,116 |
Commitments and contingencies (Note 6) | ||
Stockholders’ equity: | ||
Common stock, $0.0001 par value: Authorized shares - 100,000; Issued shares - 28,078 and 27,895; Outstanding shares - 24,963 and 25,432 | 3 | 3 |
Additional paid-in capital | 384,942 | 383,348 |
Accumulated deficit | (150,427) | (153,898) |
Accumulated other comprehensive loss | (1,391) | (1,540) |
Treasury stock: Shares at cost - 3,115 and 2,463 | (63,409) | (52,587) |
Total equity | 169,718 | 175,326 |
Equity attributable to noncontrolling interests | (2,745) | (2,366) |
Total equity | 166,973 | 172,960 |
Total liabilities and stockholders’ equity | 441,301 | 485,076 |
Series A Preferred Stock | ||
Stockholders’ equity: | ||
Preferred stock, $0.0001 par value: Authorized shares - 5,000; Series A, issued and outstanding - 127; Series B, issued and outstanding - 569 | 0 | 0 |
Series B Preferred Stock | ||
Stockholders’ equity: | ||
Preferred stock, $0.0001 par value: Authorized shares - 5,000; Series A, issued and outstanding - 127; Series B, issued and outstanding - 569 | $ 0 | $ 0 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | ||
Revenue, net | |||
Total net revenue | $ 432,435 | $ 413,677 | |
Cost of goods sold | |||
Total cost of goods sold | 345,528 | 336,370 | |
Gross profit | 86,907 | 77,307 | |
Operating expenses: | |||
Sales and marketing | [1] | 37,618 | 31,456 |
Technology | [1] | 28,992 | 25,710 |
General and administrative | [1] | 22,610 | 21,848 |
Litigation settlement | 0 | (19,520) | |
Total operating expenses | 89,220 | 59,494 | |
Operating income (loss) | (2,313) | 17,813 | |
Interest income | 125 | 91 | |
Interest expense | (710) | (2) | |
Other income (expense), net | (3,724) | 4,156 | |
Income (loss) before income taxes | (6,622) | 22,058 | |
Provision (benefit) for income taxes | (340) | 8,964 | |
Consolidated net income (loss) | (6,282) | 13,094 | |
Less: Net loss attributable to noncontrolling interests | (379) | (335) | |
Net income (loss) attributable to stockholders of Overstock.com, Inc. | $ (5,903) | $ 13,429 | |
Net income (loss) per common share—basic: | |||
Net income attributable to common shares-basic (in dollars per share) | $ (0.23) | $ 0.53 | |
Weighted average common shares outstanding-basic (in shares) | 25,290 | 25,280 | |
Net income (loss) per common share—diluted: | |||
Net income attributable to common shares-diluted (in dollars per share) | $ (0.23) | $ 0.53 | |
Weighted average common shares outstanding-diluted (in shares) | 25,290 | 25,290 | |
Direct | |||
Revenue, net | |||
Total net revenue | $ 22,828 | $ 26,651 | |
Cost of goods sold | |||
Total cost of goods sold | 20,963 | 25,406 | |
Gross profit | 1,865 | 1,245 | |
Partner and other | |||
Revenue, net | |||
Total net revenue | 409,607 | 387,026 | |
Cost of goods sold | |||
Total cost of goods sold | $ 324,565 | $ 310,964 | |
[1] | (1) Includes stock-based compensation as follows (Note 8): Cost of goods sold — direct$49 $51 Sales and marketing96 49 Technology160 167 General and administrative635 701 Total$940 $968 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 5,000 | 5,000 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 28,078,000 | 27,895,000 |
Common stock, shares outstanding | 24,963,000 | 25,432,000 |
Treasury stock, shares | 3,115,000 | 2,463,000 |
Series A Preferred Stock | ||
Preferred stock, shares issued | 127,000 | 127,000 |
Preferred stock, shares outstanding | 127,000 | 127,000 |
Series B Preferred Stock | ||
Preferred stock, shares issued | 569,000 | 569,000 |
Preferred stock, shares outstanding | 569,000 | 569,000 |
Consolidated Statements of Inc5
Consolidated Statements of Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Total stock-based compensation | $ 940 | $ 968 |
Cost of goods sold — direct | ||
Total stock-based compensation | 49 | 51 |
Sales and marketing | ||
Total stock-based compensation | 96 | 49 |
Technology | ||
Total stock-based compensation | 160 | 167 |
General and administrative | ||
Total stock-based compensation | $ 635 | $ 701 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Statement of Comprehensive Income [Abstract] | ||
Consolidated net income (loss) | $ (6,282) | $ 13,094 |
Other comprehensive income (loss): | ||
Unrealized loss on cash flow hedges, net of benefit (expense) for taxes of $(95) and $715 | 149 | (1,020) |
Other comprehensive income (loss) | 149 | (1,020) |
Comprehensive income (loss) | (6,133) | 12,074 |
Less: Comprehensive loss attributable to noncontrolling interests | (379) | (335) |
Comprehensive income (loss) attributable to stockholders of Overstock.com, Inc. | $ (5,754) | $ 12,409 |
Consolidated Statements of Com7
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Statement of Comprehensive Income [Abstract] | ||
Unrealized gain (loss) on cash flow hedges, tax benefit (expense) | $ (95) | $ 715 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands | Total | Common stock | Preferred stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive loss | Treasury stock | Parent | Noncontrolling interest | Series A Preferred StockPreferred stock | Series B Preferred StockPreferred stock |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | |||||||||||
Cumulative effect of change in accounting principle | $ 9,374 | ||||||||||
Common stock | $ 3 | ||||||||||
Beginning balance (in shares) at Dec. 31, 2016 | 27,895 | 2,463 | 127 | 569 | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||||
Common stock issued upon vesting of restricted stock (in shares) | 143 | ||||||||||
Exercise of stock options (in shares) | 40 | ||||||||||
Shares issued (in shares) | 0 | 0 | |||||||||
Purchase of treasury stock (in shares) | 652 | ||||||||||
Ending balance (in shares) at Mar. 31, 2017 | 24,963 | 28,078 | 3,115 | 127 | 569 | ||||||
Beginning balance at Dec. 31, 2016 | $ 172,960 | $ 383,348 | (153,898) | $ (1,540) | $ (52,587) | $ (2,366) | |||||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | |||||||||||
Stock-based compensation to employees and directors | 940 | ||||||||||
Exercise of stock options | 654 | ||||||||||
Net loss attributable to stockholders of Overstock.com, Inc. | (5,903) | (5,903) | |||||||||
Net other comprehensive income | 149 | 149 | |||||||||
Purchases of treasury stock | (10,822) | ||||||||||
Net loss attributable to noncontrolling interests | (379) | (379) | |||||||||
Ending balance at Mar. 31, 2017 | 166,973 | $ 0 | $ 384,942 | $ (150,427) | $ (1,391) | $ (63,409) | $ 169,718 | $ (2,745) | |||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | |||||||||||
Common stock | $ 3 | $ 3 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities: | ||||
Consolidated net income (loss) | $ (6,282) | $ 13,094 | $ (8,128) | $ 11,766 |
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||
Depreciation of fixed assets | 7,698 | 6,189 | 28,792 | 24,359 |
Amortization of intangible assets | 945 | 1,098 | 3,815 | 2,649 |
Stock-based compensation to employees and directors | 940 | 968 | 4,863 | 3,716 |
Deferred income taxes, net | (806) | 7,684 | (771) | 7,469 |
Loss on investment in precious metals | 0 | 0 | (201) | 1,183 |
Loss on investment in cryptocurrency | 0 | 0 | 0 | 35 |
Impairment of cost method investment | 4,500 | 0 | 7,350 | 0 |
Ineffective portion of loss on cash flow hedge | 0 | 0 | 0 | 124 |
Termination costs of cryptobond financing | 0 | 0 | 0 | 850 |
Other | 38 | 13 | 381 | (6) |
Changes in operating assets and liabilities, net of acquisitions: | ||||
Accounts receivable, net | 6,527 | (951) | (2,528) | (800) |
Inventories, net | 1,211 | 603 | 1,713 | 5,028 |
Prepaid inventories, net | (626) | 109 | (1,536) | 2,972 |
Prepaids and other current assets | (1,173) | 3,107 | (1,891) | 525 |
Other long-term assets, net | (404) | 12 | (1,202) | (268) |
Accounts payable | (20,456) | (45,515) | 6,236 | 10,216 |
Accrued liabilities | (13,689) | (13,336) | 16,583 | (7,130) |
Deferred revenue | (1,593) | (8,132) | (2,625) | (930) |
Other long-term liabilities | 73 | 554 | 119 | 1,344 |
Net cash (used in) provided by operating activities | (23,097) | (34,503) | 50,970 | 63,102 |
Cash flows from investing activities: | ||||
Proceeds from sale of precious metals | 0 | 0 | 1,610 | 0 |
Investment in precious metals | 0 | 0 | (1,633) | 0 |
Equity method investment | 0 | 0 | 0 | (57) |
Disbursement of note receivable | (250) | (2,850) | (1,068) | (7,850) |
Cost method investments | (453) | 0 | (5,203) | (2,000) |
Acquisitions of businesses, net of cash acquired | 0 | 1,177 | 43 | (9,424) |
Expenditures for fixed assets, including internal-use software and website development | (11,344) | (19,592) | (64,033) | (72,493) |
Other | (442) | 29 | (416) | (136) |
Net cash used in investing activities | (12,489) | (21,236) | (70,700) | (91,960) |
Cash flows from financing activities: | ||||
Paydown on direct financing arrangement | 0 | (54) | 0 | (288) |
Payments on finance obligations | (817) | (375) | (2,348) | (479) |
Payments on interest swap | 0 | (141) | (422) | (198) |
Proceeds from finance obligations | 0 | 3,421 | 7,978 | 9,119 |
Proceeds from short-term debt | 0 | 0 | 0 | 5,500 |
Payments on short-term debt | 0 | 0 | 0 | (750) |
Proceeds from long-term debt | 0 | 11,123 | 25,150 | 20,611 |
Payments on long-term debt | (187) | 0 | (187) | 0 |
Change in restricted cash | 75 | 0 | 75 | 75 |
Proceeds from exercise of stock options | 654 | 0 | 1,473 | 77 |
Proceeds from rights offering, net of offering costs | 0 | 0 | 7,591 | 0 |
Purchase of treasury stock | (10,822) | (308) | (11,354) | (321) |
Payment of debt issuance costs | 0 | 0 | 0 | (621) |
Net cash (used in) provided by financing activities | (11,097) | 13,666 | 27,956 | 32,725 |
Net (decrease) increase in cash and cash equivalents | (46,683) | (42,073) | 8,226 | 3,867 |
Cash and cash equivalents, beginning of period | 183,098 | 170,262 | 128,189 | 124,322 |
Cash and cash equivalents, end of period | 136,415 | 128,189 | 136,415 | 128,189 |
Cash paid during the period: | ||||
Interest paid (net of amounts capitalized) | 646 | 279 | 1,636 | 495 |
Taxes paid | 0 | 479 | 859 | 680 |
Non-cash investing and financing activities: | ||||
Fixed assets, including internal-use software and website development, costs financed through accounts payable and accrued liabilities | 1,317 | 6,181 | 1,317 | 6,181 |
Capitalized interest cost | 0 | 39 | 66 | 157 |
Acquisition of businesses through stock issuance | 0 | 0 | 0 | 18,149 |
Change in value of cash flow hedge | (240) | 1,594 | (2,493) | 1,718 |
Note receivable converted to cost method investment | $ 0 | $ 0 | $ 2,850 | $ 0 |
ACCOUNTING POLICIES
ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
ACCOUNTING POLICIES | ACCOUNTING POLICIES Principles of consolidation The accompanying consolidated financial statements include our accounts and the accounts of our wholly-owned and majority-owned subsidiaries. All intercompany account balances and transactions have been eliminated in consolidation. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, investment valuation, receivables valuation, valuation of derivative financial instruments, revenue recognition, sales returns, incentive discount offers, inventory valuation, depreciable lives of fixed assets and internally-developed software, goodwill valuation, intangible asset valuation, cost method investment valuation, income taxes, stock-based compensation, performance-based compensation, self-funded health insurance liabilities and contingencies. Actual results could differ materially from these estimates. Cash equivalents We classify all highly liquid instruments, including instruments with a remaining maturity of three months or less at the time of purchase, as cash equivalents. Cash equivalents were $50.2 million and $75.2 million at March 31, 2017 and December 31, 2016 , respectively. Restricted cash We consider cash that is legally restricted and cash that is held as a compensating balance for letter of credit arrangements as restricted cash. Fair value of financial instruments We account for our assets and liabilities using a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs have created the fair-value hierarchy below. This hierarchy requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. • Level 1 —Quoted prices for identical instruments in active markets; • Level 2 —Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and • Level 3 —Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Under GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring basis. Our assets and liabilities that are adjusted to fair value on a recurring basis are investments in money market mutual funds, trading securities, derivative instruments, and deferred compensation liabilities. The fair values of our investments in money market mutual funds, trading securities, and deferred compensation liabilities are determined using quoted market prices from daily exchange traded markets on the closing price as of the balance sheet date and are classified as Level 1. The fair values of our derivative instruments are determined using standard valuation models. The significant inputs used in these models are readily available in public markets, or can be derived from observable market transactions, and therefore have been classified as Level 2. Inputs used in these standard valuation models for derivative instruments include the applicable forward rates, interest rates and discount rates. Included in the fair value of derivative instruments is an adjustment for nonperformance risk. The adjustment for nonperformance risk did not have a significant impact on the estimated fair value of our derivative instruments. For additional disclosures related to our derivative instruments, see Derivative financial instruments below. The following tables summarize our assets and liabilities measured at fair value on a recurring basis using the following levels of inputs as of March 31, 2017 and December 31, 2016 as indicated (in thousands): p Fair Value Measurements at March 31, 2017: Total Level 1 Level 2 Level 3 Assets: Cash equivalents - Money market mutual funds $ 50,248 $ 50,248 $ — $ — Trading securities held in a “rabbi trust” (1) 63 63 — — Total assets $ 50,311 $ 50,311 $ — $ — Liabilities: Derivatives (2) $ 1,570 $ — $ 1,570 $ — Deferred compensation accrual “rabbi trust” (3) 65 65 — — Total liabilities $ 1,635 $ 65 $ 1,570 $ — Fair Value Measurements at December 31, 2016: Total Level 1 Level 2 Level 3 Assets: Cash equivalents - Money market mutual funds $ 75,177 $ 75,177 $ — $ — Trading securities held in a “rabbi trust” (1) 58 58 — — Total assets $ 75,235 $ 75,235 $ — $ — Liabilities: Derivatives (2) $ 1,816 $ — $ 1,816 $ — Deferred compensation accrual “rabbi trust” (3) 61 61 — — Total liabilities $ 1,877 $ 61 $ 1,816 $ — ___________________________________________ (1) — Trading securities held in a rabbi trust are included in Prepaids and other current assets and Other long-term assets, net in the consolidated balance sheets. (2) — Derivative financial instruments are included in Other current liabilities, net and Other long-term liabilities in the consolidated balance sheets. (3) — Non qualified deferred compensation in a rabbi trust is included in Accrued liabilities and Other long-term liabilities in the consolidated balance sheets. Our other financial instruments, including cash, restricted cash, accounts receivable, accounts payable, accrued liabilities, finance obligations and debt are carried at cost, which approximates their fair value. Accounts receivable Accounts receivable consist primarily of trade amounts due from customers in the United States and from uncleared credit card transactions at period end. Accounts receivable are recorded at invoiced amounts and do not bear interest. Allowance for doubtful accounts From time to time, we grant credit to some of our business customers on normal credit terms (typically 30 days). We maintain an allowance for doubtful accounts receivable based upon our business customers’ financial condition and payment history, and our historical collection experience and expected collectability of accounts receivable. The allowance for doubtful accounts receivable was $2.1 million and $2.0 million at March 31, 2017 and December 31, 2016 , respectively. Concentration of credit risk Cash equivalents include short-term, highly liquid instruments with maturities at date of purchase of three months or less. At March 31, 2017 and December 31, 2016 , two banks held the majority of our cash and cash equivalents. We do not believe that, as a result of this concentration, we are subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships. Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash equivalents and receivables. We invest our cash primarily in money market securities which are uninsured. Valuation of inventories Inventories, consisting of merchandise purchased for resale, are accounted for using a standard costing system which approximates the first-in-first-out (“FIFO”) method of accounting, and are valued at the lower of cost and net realizable value. We write down our inventory for damage or estimated obsolescence and to lower of cost and net realizable value based upon assumptions about future demand market conditions and fulfillment costs. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Once established, the original cost of the inventory less the related inventory allowance represents the new cost basis of such products. Reversal of the allowance is recognized only when the related inventory has been sold or scrapped. Prepaid inventories, net Prepaid inventories, net represent inventories paid for in advance of receipt. Prepaids and other current assets Prepaids and other current assets represent expenses paid prior to receipt of the related goods or services, including advertising, license fees, maintenance, packaging, insurance, and other miscellaneous costs. Fixed assets, net Fixed assets, which include assets such as our corporate headquarters, land improvements, building machinery and equipment, furniture and equipment, technology infrastructure, internal-use software, website development and leasehold improvements, are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets or the term of the related capital lease, whichever is shorter, as follows: Life (years) Building 40 Land improvements 20 Building machinery and equipment 15-20 Furniture and equipment 5-7 Computer hardware 3-4 Computer software 2-4 Leasehold improvements are amortized over the shorter of the term of the related leases or estimated useful lives. Included in fixed assets is the capitalized cost of internal-use software and website development, including software used to upgrade and enhance our Website and processes supporting our business. We capitalize costs incurred during the application development stage of internal-use software and amortize these costs over the estimated useful life of two to three years. Costs incurred related to design or maintenance of internal-use software are expensed as incurred. During the three months ended March 31, 2017 and 2016 , we capitalized $3.5 million and $4.7 million , respectively, of costs associated with internal-use software and website development, both developed internally and acquired externally. Amortization of costs associated with internal-use software and website development was $4.3 million and $3.8 million , respectively, for those respective periods. Depreciation expense is classified within the corresponding operating expense categories on the consolidated statements of operations as follows (in thousands): Three months ended 2017 2016 Cost of goods sold - direct $ 83 $ 77 Technology 6,685 5,920 General and administrative 930 192 Total depreciation, including internal-use software and website development $ 7,698 $ 6,189 Total accumulated depreciation of fixed assets was $187.6 million and $180.3 million at March 31, 2017 and December 31, 2016 , respectively. Upon sale or retirement of assets, cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in the consolidated statements of operations. Fixed assets included assets under capital leases and finance obligations of $21.5 million and $21.5 million , at March 31, 2017 and December 31, 2016 , respectively. Accumulated depreciation related to assets under capital leases and finance obligations was $10.0 million and $8.7 million , at March 31, 2017 and December 31, 2016 , respectively. Depreciation expense of assets recorded under capital leases was $1.3 million and $699,000 , for the three months ended March 31, 2017 and 2016 , respectively. Cost method investments At March 31, 2017 , we held minority interests (less than 20%) in seven privately held entities, which include PeerNova, Bitt, IdentityMind, Factom, MarkaVIP, View, Inc., and Ripio. The total aggregate amount of these investments (excluding any adjustments for impairment) was approximately $15.1 million . Based on the nature of one of our investments, we have a variable interest. However, because we do not have power to direct the investee's activities and we are not the investee's primary beneficiary, we therefore do not consolidate the investee in our financial statements. These investments are recognized as cost method investments included in Other long-term assets, net in our consolidated balance sheets. Earnings from the investments are recognized to the extent of dividends received, and we will recognize subsequent impairments to the investment if they are other than temporary. We review these investments individually for impairment by evaluating if events or circumstances have occurred that may have a significant adverse effect on their fair value. If such events or circumstances have occurred, we will estimate the fair value of the investment and determine if any decline in the fair value of the investment below its carrying value is other-than-temporary. In such cases, the estimated fair value of the investment is determined using unobservable inputs including assumptions by the investee's management. These inputs are classified as Level 3. See Fair value of financial instruments above. Because several of our investees are in the early startup or development stages, these entities are subject to potential changes in cash flows, valuation, and inability to attract new investors which may be necessary for the liquidity needed to support their operations. At March 31, 2017 , the carrying amount of our cost method investments was approximately $7.7 million . We recognized a $2.9 million impairment loss on one of these investments during 2016, which consisted of the entire carrying amount of the investment. We recognized a $4.5 million impairment loss on another one of these investments during the three months ended March 31, 2017 . These impairment losses were recorded in Other income (expense), net on the consolidated statements of operations. Noncontrolling interests During 2014, we formed tØ.com, Inc. (formerly Medici, Inc.) to develop blockchain and fintech technology as part of our Medici initiatives. tØ.com is a majority owned subsidiary of Overstock. During 2016, tØ.com completed the acquisition of a financial technology firm and two registered broker dealers, each of which was under common control with the firm from which the financial technology assets were purchased. The former owners of that firm hold noncontrolling interests in tØ.com. These transactions are described further in Note 3—Acquisitions, Goodwill, and Acquired Intangible Assets. The proceeds for the acquisitions were financed by tØ.com through a note payable to Overstock that bears interest at a rate that approximates the Federal Funds Rate. tØ.com is included in our consolidated financial statements. Intercompany transactions have been eliminated and the amounts of contributions and gains or losses that are attributable to the noncontrolling interests are disclosed in our consolidated financial statements. Leases We account for lease agreements as either operating or capital leases depending on certain defined criteria. In certain of our lease agreements, we receive rent holidays and other incentives. We recognize lease costs on a straight-line basis without regard to deferred payment terms, such as rent holidays, that defer the commencement date of required payments. Additionally, tenant improvement allowances are amortized as a reduction in rent expense over the term of the lease. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the life of the lease, without assuming renewal features, if any, are exercised. Treasury stock We account for treasury stock under the cost method and include treasury stock as a component of stockholders’ equity. Precious metals Our precious metals consisted of $5.9 million in gold and $4.0 million in silver at March 31, 2017 and December 31, 2016 . We store our precious metals at an off-site secure facility. Because these assets consist of actual precious metals, rather than financial instruments, we account for them as an investment initially recorded at cost (including transaction fees) and then adjusted to the lower of cost or market based on an average unit cost. On an interim basis, we recognize decreases in the value of these assets caused by market declines. Subsequent increases in the value of these assets through market price recoveries during the same fiscal year are recognized in the later interim period, but may not exceed the total previously recognized decreases in value during the same year. Gains or losses resulting from changes in the value of our precious metal assets are recorded in Other income (expense), net in our consolidated statements of operations. There were no recorded gains or losses on investments in precious metals for the three months ended March 31, 2017 and 2016 . Goodwill Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business combinations. Goodwill is not amortized but is tested for impairment at least annually. When evaluating whether goodwill is impaired, we make a qualitative assessment to determine if it is more likely than not that its fair value is less than its carrying amount. If the qualitative assessment determines that it is more likely than not that its fair value is less than its carrying amount, we compare the fair value of the reporting unit to which the goodwill is assigned to its carrying amount. If the carrying amount exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss, if any, is calculated by comparing the implied fair value of the goodwill to its carrying amount. In calculating the implied fair value of goodwill, the fair value of the reporting unit is allocated to the other assets and liabilities within the reporting unit based on estimated fair value. The excess of the fair value of a reporting unit over the amount allocated to its other assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized when the carrying amount of goodwill exceeds its implied fair value. In accordance with this guidance, we test for impairment of goodwill annually or when we deem that a triggering event has occurred. There were no impairments to goodwill recorded during the three months ended March 31, 2017 or the year ended December 31, 2016 . Intangible assets other than goodwill We capitalize and amortize intangible assets other than goodwill over their estimated useful lives unless such lives are indefinite. Intangible assets other than goodwill acquired separately from third-parties are capitalized at cost while such assets acquired as part of a business combination are capitalized at their acquisition-date fair value. Intangible assets other than goodwill are amortized using the straight line method of amortization over their useful lives, with the exception of certain intangibles (such as acquired technology, customer relationships, and trade names) which are amortized using an accelerated method of amortization based on cash flows. These assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable as described below under Impairment of long-lived assets . Intangible assets, net consist of the following (in thousands): March 31, 2017 December 31, 2016 Acquired intangible assets $ 16,000 $ 16,000 Intangible assets, other (1) 1,487 1,356 17,487 17,356 Less: accumulated amortization of intangible assets (7,388 ) (6,443 ) Total intangible assets, net $ 10,099 $ 10,913 ___________________________________________ (1) — At March 31, 2017, the weighted average remaining useful life for intangible assets, other, excluding fully amortized intangible assets, was 3.50 years. Amortization of intangible assets other than goodwill is classified within the corresponding operating expense categories on the consolidated statements of operations as follows (in thousands): Three months ended March 31, 2017 2016 Technology $ 905 $ 726 Sales and marketing 20 350 General and administrative 20 22 Total amortization $ 945 $ 1,098 Estimated amortization expense for the next five years is: $2.8 million for the remainder of 2017 , $2.8 million in 2018 , $2.0 million in 2019 , $1.3 million in 2020 , $900,000 in 2021 and $100,000 thereafter. Impairment of long-lived assets We review property and equipment and other long-lived assets, including intangible assets other than goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability is measured by comparison of the assets’ carrying amount to future undiscounted net cash flows the asset group is expected to generate. Cash flow forecasts are based on trends of historical performance and management’s estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions. If such asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair values. There were no impairments to long-lived assets recorded during the three months ended March 31, 2017 or the year ended December 31, 2016 . Other long-term assets, net Other long-term assets, net consist primarily of cost method investments (see Cost method investments above) and related convertible notes and long-term prepaid expenses. Derivative financial instruments In 2014, we entered into a loan agreement in connection with the construction of our new corporate headquarters. We began borrowing under the facility in October 2015. Because amounts borrowed on the loan will carry a variable LIBOR-based interest rate, we will be affected by changes in certain market conditions. These changes in market conditions may adversely impact our financial performance, and as such, we use derivatives as a risk management tool to mitigate the potential impact of these changes. We do not enter into derivatives for speculative or trading purposes. The primary market risk we manage through the use of derivative instruments is interest rate risk on the amounts we have borrowed under the loan agreement relating to our new headquarters. To manage that risk, we use interest rate swap agreements. An interest rate swap agreement is a contract between two parties to exchange cash flows based on underlying notional amounts and indices. Our interest rate swaps entitle us to pay amounts based on a fixed rate in exchange for receipt of amounts based on variable rates over the term of the related loan agreement. The notional amounts under our hedges were $45.6 million and $45.8 million at March 31, 2017 and December 31, 2016 , respectively. Our derivatives are carried at fair value in our consolidated balance sheets in Other current liabilities, net and Other long-term liabilities on a gross basis. The accounting for gains and losses that result from changes in the fair values of derivative instruments depends on whether the derivatives have been designated and qualify as hedging instruments under GAAP. Our derivatives have been designated and qualify as cash flow hedges. We formally designated and documented, at inception, the financial instruments as hedges of specific underlying exposures, the risk management objectives, and the strategy for undertaking the hedging transactions. In addition, we formally assess, both at the inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are effective at offsetting changes in the cash flows of the related underlying exposures. To the extent that the hedges are effective, the changes in fair values of our cash flow hedges are recorded in Accumulated other comprehensive income (loss) in the consolidated statements of changes in stockholders' equity. Any ineffective portion is immediately recognized into earnings. The variable-rate interest on the borrowing for our new corporate headquarters was capitalized during the construction period. The amounts in Accumulated other comprehensive income (loss) related to the cash flow hedge of the variability of the interest that was capitalized is reclassified into earnings over the depreciable life of the asset. During the three months ended March 31, 2016 , the amount of gains or losses in accumulated other comprehensive income (loss) that has been reclassified into earnings was not material and the amounts at March 31, 2017 that we will reclassify into earnings within the next 12 months is not expected to be material. We determine the fair values of our derivatives based on quoted market prices or using standard valuation models (see Fair value of financial instruments above). The notional amounts of the derivative financial instruments do not necessarily represent amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the financial risks described above. The amounts exchanged are calculated by reference to the notional amounts and by other terms of the derivatives, such as interest rates. The following table shows the effect of derivative financial instruments that were designated as accounting hedges for the period indicated (in thousands): Cash flow hedges Amount of gain (loss) recognized in OCI on derivative (effective portion) net of tax Location of gain (loss) reclassified from Accumulated OCI into operations (effective portion) Amount of gain (loss) reclassified from Accumulated OCI into operations (effective portion) Location of gain (loss) recognized in operations on derivative (ineffective portion) Amount of gain (loss) recognized in operations on derivative (ineffective portion) Three months ended March 31, 2017 Interest rate swap $ 149 Interest expense $ 4 Other income (expense) $ — Three months ended March 31, 2016 Interest rate swap $ (1,020 ) Interest expense $ — Other income (expense) $ — The following table provides the outstanding notional balances and fair values of derivative financial instruments that were designated as accounting hedges outstanding positions for the dates indicated, and recorded gains (losses) during the periods indicated (in thousands): Cash flow hedges Location in balance sheet Expiration date Outstanding notional Fair value Beginning gains (losses) Gains (losses) recorded during period (1) Ending gains (losses) Three months ended March 31, 2017 Interest rate swap Current and Other long-term liabilities 2023 $ 45,573 $ (1,570 ) $ (1,816 ) $ 246 $ (1,570 ) Three months ended March 31, 2016 Interest rate swap Current and Other long-term liabilities 2023 $ 34,097 $ (3,991 ) $ (2,397 ) $ (1,594 ) $ (3,991 ) ___________________________________________ (1) — Gains (losses) recorded during the period are presented gross of the related tax impact. Revenue recognition We derive our revenue primarily from direct revenue and partner revenue from merchandise sales. We also earn revenue from advertising on our website and from other pages. We have organized our operations into two principal reporting segments based on the primary source of revenue: direct revenue and partner revenue (see Note 9—Business Segments). Revenue is recognized when the following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or the service has been provided; (3) the selling price or fee revenue earned is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. Revenue related to merchandise sales is recognized upon delivery to our customers. As we ship high volumes of packages through multiple carriers, it is not practical for us to track the actual delivery date of each shipment. Therefore, we use estimates to determine which shipments are delivered and, therefore, recognized as revenue at the end of the period. Our delivery date estimates are based on average shipping transit times, which are calculated using the following factors: (i) the type of shipping carrier (as carriers have different in-transit times); (ii) the fulfillment source (either our warehouses, those warehouses we control, or those of our partners); (iii) the delivery destination; and (iv) actual transit time experience, which shows that delivery date is typically one to eight business days from the date of shipment. We review and update our estimates on a quarterly basis based on our actual transit time experience. However, actual shipping times may differ from our estimates. We evaluate the criteria outlined in ASC Topic 605-45, Principal Agent Considerations , in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. When we are the primary obligor in a transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, or have several but not all of these indicators, revenue is recorded gross. If we are not the primary obligor in the transaction and amounts earned are determined using a fixed percentage, revenue is recorded on a net basis. Currently, the majority of both direct revenue and partner revenue is recorded on a gross basis, as we are the primary obligor. We present revenue net of sales taxes. We periodically provide incentive offers to our customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases and other similar offers, which, when used by customers, are treated as a reduction of revenue. We evaluate the revenue recognition criteria above for our broker dealer subsidiaries (see Note 10—Broker Dealers) and we recognize securities transactions (and the related commission revenue) on a trade date and gross basis. Based upon our historical experience, direct and partner revenues typically increase during the fourth quarter because of the holiday retail season and decrease in the following quarter(s). Direct revenue Direct revenue is derived from merchandise sales of our owned inventory to individual consumers and businesses. Direct revenue comes from merchandise sales that occur primarily through our Website, but may also occur through offline and other channels. Partner and other revenue Partner and other revenue is derived primarily from merchandise sales of inventory owned by our partners which they generally ship directly to our consumers and businesses. Partner and other revenue comes from merchandise sales that occur primarily through our Website, but may also occur through offline and other channels, including through our broker dealer subsidiaries in our Other segment. Club O loyalty program We have a customer loyalty program called Club O Gold for which we sell annual memberships. For Club O Gold memberships, we record membership fees as deferred revenue and we recognize revenue ratably over the membership period. The Club O Gold loyalty program allows members to earn Club O Reward dollars for qualifying purchases made on our Website. We also have a co-branded credit card program (see Co-branded credit card program below for more information). Co-branded cardholders are also Club O Gold members and earn additional reward dollars for purchases made on our Website, and from other merchants. Earned Club O Reward dollars may be redeemed on future purchases made through our Website. We recognize revenue for Club O Reward dollars when customers redeem their reward dollars as part of a purchase on our Website. We account for these transactions as multiple element arrangements and allocate revenue to the elements using their relative fair values. We include the value of reward dollars earned in deferred revenue and we record it as a reduction of revenue at the time the reward dollars are earned. Club O Gold membership reward dollars expire 90 days after the customer’s Club O Gold membership expires. When Club O Reward dollars expire, we recognize reward dollar breakage as Other income (expense), net in our consolidated statements of operations. Beginning in 2015, we enrolled a significant number of members in Club O Silver, a newly introduced Club O membership tier for customers who agree to receive promotional emails. Club O Silver members earned Club O Rewards on qualifying purchases that expire after 90 days from a qualifying purchase. We discontinued Club O Silver in October 2016, and as a result we do not expect further Club O Silver rewards breakage in the future. In instances where customers receive free Club O Reward dollars not associated with any purchases, we account for these transactions as sales incentives such as coupons and record a reduction of revenue at the time the reward dollars are redeemed. Co-branded credit card program We have a co-branded credit card agreement with a commercial bank for the issuance of credit cards bearing the Overstock.com brand, under which the bank pa |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION As used herein, "Overstock," "Overstock.com," "O.co," "we," "our" and similar terms include Overstock.com, Inc. and its majority-owned subsidiaries, unless the context indicates otherwise. We have prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and our audited annual consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2016 . The accompanying unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in our opinion, necessary for a fair presentation of results for the interim periods presented. Preparing financial statements requires us to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on our best knowledge of current events and actions that we may undertake in the future, actual results may be different from the estimates. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for any future period or the full fiscal year. For purposes of comparability, the presentation of certain immaterial amounts in the prior periods has been conformed with the current period presentation. We also retrospectively applied certain accounting standard updates as discussed in Note 2—Accounting Policies, Recently adopted accounting standards. |
ACQUISITIONS, GOODWILL, AND ACQ
ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2017 | |
Business Combinations [Abstract] | |
Acquisitions, Goodwill, and Acquired Intangible Assets | ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS As part of our Medici blockchain and fintech technology initiatives, during 2015, a subsidiary of tØ.com, Inc. (formerly Medici, Inc.) entered into a purchase agreement to acquire Cirrus Technologies LLC, a financial technology firm. In connection with the Cirrus Technology acquisition, a subsidiary of tØ.com also entered into an agreement to purchase SpeedRoute LLC and all of the outstanding membership interests not already owned by tØ.com in Pro Securities LLC. Both SpeedRoute and Pro Securities were under common control with Cirrus Technologies LLC by a party that holds a noncontrolling interest in tØ.com. SpeedRoute and Pro Securities are FINRA-registered broker dealers. This acquisition closed in two parts. The Cirrus Technologies acquisition closed in Q3 2015 and the membership interests in SpeedRoute and Pro Securities closed in Q1 2016 after receiving approval from FINRA. The total gross purchase price of this acquisition was $29.7 million , consisting of approximately $11.6 million in cash (which excludes $2.2 million in cash acquired, primarily during Q1 2016) and 908,364 shares of Overstock’s common stock valued at approximately $18.1 million . The proceeds for the acquisition were financed by tØ.com through a note payable to Overstock that bears interest that approximates the Federal Funds Rate. The total purchase price has been allocated to the assets acquired and the liabilities assumed based on their respective fair values at the acquisition dates, with amounts exceeding fair value recorded as goodwill. We did not record significant deferred taxes related to the acquisition. The goodwill of the acquired business is deductible for tax purposes. The acquisition of Cirrus Technologies and the acquisition of the membership interests of SpeedRoute and Pro Securities were negotiated and contemplated in conjunction with each other. As such, this was recognized as a single transaction. We estimated the fair value of the acquired assets based on Level 3 inputs, which were unobservable (see Note 2—Accounting Policies, Fair value of financial instruments). These inputs included our estimate of future revenues, operating margins, discount rates, royalty rates and assumptions about the relative competitive environment. The fair values of the assets acquired and liabilities assumed at the acquisition dates are as follows (in thousands): Purchase Price Fair Value Cash paid, net of cash acquired $ 9,353 Common stock issued 18,149 $ 27,502 Allocation Goodwill $ 11,914 Intangibles 16,000 Accounts receivable and other assets 2,565 Other liabilities assumed (2,977 ) $ 27,502 The following table details the identifiable intangible assets acquired at their fair value and useful lives as of March 31, 2017 (amounts in thousands): Intangible Assets Fair Value Weighted Average Useful Life (years) Technology and developed software $ 13,600 4.38 Customer relationships 1,900 — Trade names 300 7.61 Other 200 Total acquired intangible assets at the acquisition dates 16,000 Less: accumulated amortization of acquired intangible assets (6,308 ) Total acquired intangible assets, net $ 9,692 The expense for amortizing acquired intangible assets in connection with this acquisition was $925,000 and $1.1 million for the three months ended March 31, 2017 and 2016 , respectively. Acquired intangible assets primarily include technology, customer relationships and trade names. As described above, we determined the fair value of these assets using an income approach method to determine the present value of expected future cash flows for each identifiable intangible asset. This method was based on discount rates which incorporate a risk premium to take into account the risks inherent in those expected cash flows. The expected cash flows were estimated using the expectations of market participants. The acquired assets, liabilities, and associated operating results were consolidated into our financial statements at the acquisition dates, or the dates on which we obtained control of the acquired assets or interests. |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 3 Months Ended |
Mar. 31, 2017 | |
Payables and Accruals [Abstract] | |
ACCRUED LIABILITIES | ACCRUED LIABILITIES Accrued liabilities consist of the following (in thousands): March 31, 2017 December 31, 2016 Accrued marketing expenses $ 20,627 $ 26,358 Accounts payable accruals 16,865 17,229 Allowance for returns 13,537 18,176 Accrued compensation and other related costs 11,764 8,903 Accrued loss contingencies 9,155 9,173 Other accrued expenses 6,176 6,315 Accrued freight 3,293 10,062 Total accrued liabilities $ 81,417 $ 96,216 |
BORROWINGS
BORROWINGS | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
BORROWINGS | BORROWINGS U.S. Bank term loan and revolving loan agreement We are party to a loan agreement (as amended through March 30, 2017, the “Agreement”) dated October 24, 2014 with U.S. Bank National Association and other banks in connection with the construction and long-term financing of our corporate headquarters (the “Project”). The Agreement provides for a senior secured real estate loan of $45.8 million (the “Term Loan”) that we used to finance a portion of the Project and a $25.0 million senior secured revolving credit facility (the “Revolving Loan”) to be used for working capital and other permitted purposes, including stock repurchases. The Term Loan and the Revolving Loan are both secured by the Project, our inventory and accounts receivable, substantially all of our deposit accounts and related assets. On January 1, 2017, the Term Loan was converted from a real estate loan used in the construction of our headquarters into an approximately 6.75 -year loan due October 1, 2023. The aggregate principal amount converted was $45.8 million . The Revolving Loan terminates June 30, 2020. Amounts outstanding under the Term Loan carry an interest rate based on one-month LIBOR plus 2.00% or an Alternate Base Rate plus 1.00% . However, we have entered into interest rate swap agreements designed to fix our interest rate on the Term Loan at approximately 4.6% annually (see Derivative financial instruments in Note 2. Accounting Policies). We are required to make monthly payments of principal plus interest, with a balloon payment of all unpaid principal and interest on October 1, 2023. Amounts outstanding under the Revolving Loan will carry an interest rate based on LIBOR plus 2.00% or an Alternate Base Rate plus 1.00% . Under the Agreement, we are required to maintain compliance as of the end of each calendar quarter with the following financial covenants: • a fixed charge coverage ratio on a trailing 12 -month basis of no less than 1.15 to 1.00; • a cash flow leverage ratio on a trailing 12 -month basis not greater than 2.75 to 1.00; and • minimum liquidity of at least $50.0 million . At March 31, 2017 , we were in compliance with the financial covenants. The Term Loan includes customary events of default. The Term Loan and the Revolving Loan are cross-defaulted and cross-collateralized. In the event of a default, the default rate of interest would be 2.00% above the otherwise applicable rate. At March 31, 2017 , our outstanding balance on the Term Loan was $45.6 million and we had no amounts outstanding under the Revolving Loan. Our liability under the Term Loan approximates fair value. Amounts outstanding under the Term Loan are presented net of discount and issuance costs in our consolidated balance sheets. Future principal payments on the Term Loan as of March 31, 2017 , are as follows (in thousands): Payments due by period: 2017 (Remainder) $ 843 2018 1,124 2019 1,124 2020 1,124 2021 1,124 Thereafter 40,234 $ 45,573 On March 30, 2017, we amended the Agreement to increase our borrowing capacity under the Revolving Loan from $10 million to $25 million , to modify the Cash Flow Leverage Ratio limitation to not to exceed 2.75 to 1.00 (previously 2.50 to 1.00) and to make other changes, including a modification of the definition of "Restricted Payment" to exclude stock repurchases of up to $60 million from January 1, 2017 to June 30, 2018. The modification also extended the term of the Revolving Loan to June 30, 2020. U.S. Bank master lease agreement In November 2015, we entered into a Master Lease Agreement and a Financial Covenants Rider (collectively, the “Master Lease Agreement”) with U.S. Bank Equipment Finance, a division of U.S. Bank National Association. (“Lessor”). Under the Master Lease Agreement we are able to sell certain assets (the "Leased Assets") to the Lessor and simultaneously lease them back for a period of 60 months. We are also able to finance certain software licenses (inclusive in the "Leased Assets") for a period of 60 months. We have the right to repurchase the Leased Assets and terminate the Master Lease Agreement twelve months following the initial term. We also have the right to repurchase the Leased Assets at the end of the term for $1.00 . Payments on the Master Lease Agreement are due monthly. During the three months ended March 31, 2017 , we did not receive proceeds under the Master Lease Agreement. At March 31, 2017 , our total outstanding liability under the Master Lease Agreement was $14.3 million . The average interest rate for amounts outstanding under the Master Lease agreement was approximately 3.50% . We have accounted for the Master Lease Agreement as a financing transaction and amounts owed are included in Finance obligations, current and non-current in the consolidated balance sheets. We recorded no gain or loss as a result of this transaction. The Master Lease Agreement allows for lease financing of up to $20 million . Our liability under the Master Lease Agreement approximates fair value. In connection with the Master Lease Agreement, and as long as any obligations remain outstanding under the Master Lease Agreement, we are required to maintain compliance with the same financial covenants as the Agreement with U.S. Bank described above. At March 31, 2017 , we were in compliance with these financial covenants. Future principal payments of finance obligations as of March 31, 2017 , are as follows (in thousands): Payments due by period: 2017 (Remainder) $ 2,439 2018 3,356 2019 3,479 2020 3,502 2021 1,494 Thereafter — $ 14,270 U.S. Bank letters of credit At March 31, 2017 and December 31, 2016 , letters of credit totaling $355,000 and $430,000 , respectively, were issued on our behalf collateralized by compensating cash balances held at U.S. Bank, which are included in Restricted cash in the accompanying consolidated balance sheets. U.S. Bank commercial purchasing card agreement We have a commercial purchasing card (the “Purchasing Card”) agreement with U.S. Bank. We use the Purchasing Card for business purpose purchasing and must pay it in full each month. At March 31, 2017 , $904,000 was outstanding and $4.1 million was available under the Purchasing Card. At December 31, 2016 , $811,000 was outstanding and $4.2 million was available under the Purchasing Card. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Summary of future minimum lease payments for all operating leases Minimum future payments under all operating leases as of March 31, 2017 , are as follows (in thousands): Payments due by period 2017 (Remainder) $ 6,406 2018 6,686 2019 6,169 2020 4,056 2021 4,102 Thereafter 20,411 $ 47,830 Rental expense for operating leases totaled $2.4 million and $3.4 million for the three months ended March 31, 2017 and 2016 , respectively. Legal Proceedings and Contingencies From time to time, we are involved in litigation concerning consumer protection, employment, intellectual property and other commercial matters related to the conduct and operation of our business and the sale of products on our Website. In connection with such litigation, we may be subject to significant damages. In some instances other parties may have contractual indemnification obligations to us. However, such contractual obligations may prove unenforceable or non-collectible, and if we cannot enforce or collect on indemnification obligations, we may bear the full responsibility for damages, fees and costs resulting from such litigation. We may also be subject to penalties and equitable remedies that could force us to alter important business practices. Such litigation could be costly and time consuming and could divert or distract our management and key personnel from our business operations. Due to the uncertainty of litigation and depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect our business, results of operations, financial position, or cash flows. On September 23, 2009, SpeedTrack, Inc. sued us along with 27 other defendants in the United States District Court in the Northern District of California. We are alleged to have infringed a patent covering search and categorization software. We believe that certain third party vendors of products and services sold to us are contractually obligated to indemnify us, and we have tendered defense of the case to an indemnitor who accepted the defense. On April 21, 2016, the court entered an order partially dismissing the claims against us. On May 4, 2016, the plaintiff filed an amended complaint, and we have filed our answer. The nature of the loss contingencies relating to claims that have been asserted against us are described above. However, no estimate of the loss or range of loss can be made. We intend to vigorously defend this action and pursue our indemnification rights with our vendors. On November 17, 2010, we were sued in the Superior Court of California, County of Alameda, by District Attorneys for the California Counties of Alameda, Marin, Monterey, Napa, Santa Clara, Shasta and Sonoma County, and the County of Santa Cruz later joined the suit. The district attorneys sought damages and an injunction under claims for violations of California consumer protection laws, alleging we made untrue or misleading statements concerning our pricing, price reductions, sources of products and shipping charges. The complaint asked for damages in the amount of not less than $15.0 million . We tried the case in September 2013 before the judge of the court and made final arguments in December 2013. On January 3, 2014, the court issued a tentative ruling in favor of the District Attorneys, which became a final Statement of Decision on February 5, 2014. The decision provides for an injunction that prescribes disclosures necessary for certain types of price advertising and price reductions and imposes civil penalties of $3,500 per day for practices from March 2006 through September 2008, and $2,000 per day for September 2008 through September 2013, totaling $6.8 million . The court issued a Final Judgment February 19, 2014 reflecting the Court’s Statement of Decision. We have stipulated to Plaintiff’s reimbursement of costs in the amount of $111,500 . We have appealed the decision and have secured a bond as required in the ruling in the amount of 150% of the penalty imposed in the matter until the ruling on the appeal. The appeal is briefed and oral argument was held on April 27, 2017. The nature of the loss contingencies relating to claims that have been asserted against us are described above. We intend to continue to vigorously pursue the appeal and defend this action. On February 11, 2013, RPost Holdings, Inc., RPost Communications Limited, and RMail Limited, filed suit against us in the United States District Court in Eastern District of Texas for infringement of patents covering products and services that verify the delivery and integrity of email messages. We tendered defense of the case to an indemnitor who accepted the defense. The nature of the loss contingencies relating to claims that have been asserted against us are described above. However, no estimate of the loss or range of loss can be made. We intend to vigorously defend this action and pursue our indemnification rights with our vendors. In June 2013, William French filed suit against us and 46 other defendants under seal in the Superior Court of the State of Delaware. The filing was unsealed on March 24, 2014. French brought the action on Delaware’s behalf for violations of Delaware’s unclaimed property laws and for recovery of the unredeemed gift card value allegedly attributable to Delaware residents. French’s complaint alleges that we, and other defendants, knowingly refused to fulfill obligations under Delaware's Abandoned Property Law by failing to report and deliver unclaimed gift card funds to the State of Delaware, and knowingly made, used or caused to be made or used, false statements and records to conceal, avoid or decrease an obligation to pay or transmit money to Delaware in violation of the Delaware False Claims and Reporting Act. The complaint seeks an injunction, monetary damages (including treble damages) penalties, and attorney's fees and costs. We, along with others, filed motions to dismiss the case. The court dismissed one count, but allowed one count to remain. The case is in its discovery stages. We intend to vigorously defend this action. The nature of the loss contingencies relating to claims that have been asserted against us are described above. On April 28, 2016, the State of South Dakota sued us along with three other defendants in the Sixth Judicial Circuit Court of South Dakota. South Dakota alleges that U.S. constitutional law should be revised to permit South Dakota to require out-of-state ecommerce websites to withhold and remit sales tax in South Dakota. We removed the case to the United States District Court which recently remanded the case back to the South Dakota state court. Pursuant to the statute, we would not be required to withhold and remit sales tax until there was verdict in favor of South Dakota which was then upheld by the highest applicable appellate court. The statute also would not require us to pay sales tax retroactively if we were to lose. The state court recently granted summary judgment in our favor, and South Dakota has filed to appeal the decision. In September 2016, we received a letter from the District Attorney of Sonoma County, California who is acting as part of the Consumer Protection Divisions of the following counties in California: Sonoma, Alameda, Monterey, Napa, Solano, Fresno, Sacramento, Shasta, Santa Cruz, Butte, and Merced. The District Attorney alleges that certain plastic products on our site which are labeled as biodegradable, degradable, or decomposable constitute false advertising under California law. The District Attorney has requested documentation from us regarding this claim and we are cooperating. The nature of the loss contingencies relating to claims that have been asserted against us are described above. We intend to vigorously defend this matter and pursue our indemnification rights with our vendors. We establish liabilities when a particular contingency is probable and estimable. At March 31, 2017 , we have accrued $9.2 million in light of probable and estimable liabilities, which is included in accrued liabilities in the Consolidated Balance Sheets. It is reasonably possible that the actual losses may exceed our accrued liabilities. We have other contingencies which are reasonably possible; however, the reasonably possible exposure to losses cannot currently be estimated. |
INDEMNIFICATIONS AND GUARANTEES
INDEMNIFICATIONS AND GUARANTEES | 3 Months Ended |
Mar. 31, 2017 | |
INDEMNIFICATIONS AND GUARANTEES | |
INDEMNIFICATIONS AND GUARANTEES | INDEMNIFICATIONS AND GUARANTEES During our normal course of business, we have made certain indemnities, commitments, and guarantees under which we may be required to make payments in relation to certain transactions. These indemnities include, but are not limited to, indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, the environmental indemnity we entered into in favor of the lenders under our Loan Agreement with U.S. Bank and other banks, and indemnities to our directors and officers to the maximum extent permitted under the laws of the State of Delaware. The duration of these indemnities, commitments, and guarantees varies, and in certain cases, is indefinite. In addition, the majority of these indemnities, commitments, and guarantees do not provide for any limitation of the maximum potential future payments we could be obligated to make. As such, we are unable to estimate with any reasonableness our potential exposure under these items. We have not recorded any liability for these indemnities, commitments, and guarantees in the accompanying consolidated balance sheets. We do, however, accrue for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is both probable and reasonably estimable. |
STOCK-BASED AWARDS
STOCK-BASED AWARDS | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED AWARDS | STOCK-BASED AWARDS We have equity incentive plans that provide for the grant to employees and board members of stock-based awards, including stock options and restricted stock. During the three months ended March 31, 2017 , the Compensation Committee of the Board of Directors approved grants of 253,500 restricted stock awards to our officers, board members and employees. The restricted stock awards vest over three years at 33.3% at the end of the first year, 33.3% at the end of the second year and 33.3% at the end of the third year and are subject to the recipient's continuing service to us. At March 31, 2017 , there were 585,851 unvested restricted stock awards that remained outstanding. The cost of restricted stock awards is determined using the fair value of our common stock on the date of the grant, and compensation expense is either recognized on a straight line basis over the three -year vesting schedule or on an accelerated schedule when vesting of restricted stock awards exceeds a straight-line basis. The cumulative amount of compensation expense recognized at any point in time is at least equal to the portion of the grant date fair value of the award that is vested at that date. The weighted average grant date fair value of restricted stock awards granted during the three months ended March 31, 2017 was $16.90 . Stock-based compensation expense related to restricted stock awards was $940,000 and $968,000 during the three months ended March 31, 2017 and 2016 , respectively. The following table summarizes restricted stock award activity during the three months ended March 31, 2017 (in thousands): Three months ended Units Weighted Outstanding—beginning of year 560 $ 17.44 Granted at fair value 254 16.90 Vested (143 ) 18.54 Forfeited (85 ) 16.22 Outstanding—end of period 586 $ 17.11 |
BUSINESS SEGMENTS
BUSINESS SEGMENTS | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
BUSINESS SEGMENTS | BUSINESS SEGMENTS Segment information has been prepared in accordance with ASC Topic 280 Segment Reporting . We determined our segments based on how we manage our business, which, in our view, consists primarily of our Retail and Medici businesses. Our Retail business consists of our Direct and Partner reportable segments. We use gross profit as the measure to determine our reportable segments because there is not discrete financial information available below gross profit for our Direct and Partner segments. As a result, our Medici business is not significant as compared to our Direct and Partner segments and is included in Other. Our Other segment consists of Medici. Although our Direct and Partner segments both relate to our Retail business, we do not combine these segments because they have dissimilar economic characteristics, such as gross profit margins. We do not allocate assets between our segments for our internal management purposes, and as such, they are not presented here. There were no significant inter-segment sales or transfers during the three months ended March 31, 2017 and 2016 . The following table summarizes information about reportable segments for the three months ended March 31, 2017 and 2016 (in thousands): Three months ended Direct Partner Retail Total Other Total 2017 Revenue, net $ 22,828 $ 405,261 $ 428,089 $ 4,346 $ 432,435 Cost of goods sold 20,963 321,297 342,260 3,268 345,528 Gross profit $ 1,865 $ 83,964 $ 85,829 $ 1,078 $ 86,907 Operating expenses 84,538 4,682 89,220 Interest and other income (expense), net (1) 102 (4,411 ) (4,309 ) Pre-tax income (loss) 1,393 (8,015 ) (6,622 ) Provision (benefit) for income taxes 889 (1,229 ) (340 ) Net income (loss) (2) (3) (4) $ 504 $ (6,786 ) $ (6,282 ) 2016 Revenue, net $ 26,651 $ 384,269 $ 410,920 $ 2,757 $ 413,677 Cost of goods sold 25,406 309,297 334,703 1,667 336,370 Gross profit $ 1,245 $ 74,972 $ 76,217 $ 1,090 $ 77,307 Operating expenses 55,380 4,114 59,494 Interest and other income (expense), net (1) 4,245 — 4,245 Pre-tax income (loss) 25,082 (3,024 ) 22,058 Provision (benefit) for income taxes 10,045 (1,081 ) 8,964 Net income (loss) (2) (3) (4) $ 15,037 $ (1,943 ) $ 13,094 ___________________________________________ (1) — The above amounts exclude intercompany transactions eliminated in consolidation, which consist primarily of interest. These amounts were $306,000 and $155,000 for the three months ended March 31, 2017 and 2016 , respectively. (2) — Net income presented for segment reporting purposes is before any adjustments attributable to noncontrolling interests. (3) — The above amounts include Retail depreciation and amortization expense of $7.4 million and $6.2 million for the three months ended March 31, 2017 and 2016 , respectively. (4) — The above amounts include Other depreciation and amortization expense of $1.2 million and $1.1 million for the three months ended March 31, 2017 and 2016 , respectively. For additional information regarding our non-GAAP financial measures, please see Item 2 of Part I, Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates. Our Direct segment includes revenues, direct costs, and cost allocations associated with sales of inventory we own. Costs for this segment include product costs, freight, warehousing and fulfillment costs, credit card fees and customer service costs. Our Partner segment includes revenues, direct costs and cost allocations associated with sales of inventory owned by our partners. Costs for this segment include product costs, outbound freight and fulfillment costs, credit card fees and customer service costs. For the three months ended March 31, 2017 and 2016 , substantially all of our sales revenues were attributable to customers in the United States. At March 31, 2017 and December 31, 2016 , substantially all of our fixed assets were located in the United States. |
BROKER DEALERS
BROKER DEALERS | 3 Months Ended |
Mar. 31, 2017 | |
Brokers and Dealers [Abstract] | |
BROKER DEALERS | BROKER DEALERS As part of our Medici blockchain and fintech technology initiatives, we hold a controlling interest in each of two broker dealers, SpeedRoute LLC ("SpeedRoute") and Pro Securities LLC ("Pro Securities"), which we acquired in January 2016 (see Note 3—Acquisitions, Goodwill, and Acquired Intangible Assets). SpeedRoute is an electronic, agency-only FINRA-registered broker dealer that provides connectivity for its customers to U.S. equity exchanges as well as off-exchange sources of liquidity such as dark pools. All of SpeedRoute's customers are registered broker dealers. SpeedRoute does not hold, own or sell securities. Pro Securities is a FINRA-registered broker dealer that owns and operates the Pro Securities alternative trading system ("ATS"), which is registered with the SEC. An ATS is a trading system that is not regulated as an exchange, but is a licensed venue for matching buy and sell orders. The Pro Securities ATS is a closed system available only to its broker dealer subscribers. Pro Securities does not accept orders from non-broker dealers, nor does it hold, own or sell securities. SpeedRoute and Pro Securities are subject to the SEC’s Uniform Net Capital Rule (SEC Rule 15c3-1), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 and that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. At March 31, 2017 , SpeedRoute had net capital of $654,608 , which was $516,472 in excess of its required net capital of $138,136 and SpeedRoute's net capital ratio was 3.2 to 1. At March 31, 2017 , Pro Securities had net capital of $56,568 , which was $51,568 in excess of its required net capital of $5,000 and Pro Securities net capital ratio was 0.31 to 1. SpeedRoute and Pro Securities did not have any securities owned or securities sold, not yet purchased at March 31, 2017 . |
ACCOUNTING POLICIES (Policies)
ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Principles of consolidation | Principles of consolidation The accompanying consolidated financial statements include our accounts and the accounts of our wholly-owned and majority-owned subsidiaries. All intercompany account balances and transactions have been eliminated in consolidation. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, investment valuation, receivables valuation, valuation of derivative financial instruments, revenue recognition, sales returns, incentive discount offers, inventory valuation, depreciable lives of fixed assets and internally-developed software, goodwill valuation, intangible asset valuation, cost method investment valuation, income taxes, stock-based compensation, performance-based compensation, self-funded health insurance liabilities and contingencies. Actual results could differ materially from these estimates. |
Cash equivalents | Cash equivalents We classify all highly liquid instruments, including instruments with a remaining maturity of three months or less at the time of purchase, as cash equivalents. |
Restricted cash | Restricted cash We consider cash that is legally restricted and cash that is held as a compensating balance for letter of credit arrangements as restricted cash |
Fair value of financial instruments | Fair value of financial instruments We account for our assets and liabilities using a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs have created the fair-value hierarchy below. This hierarchy requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. • Level 1 —Quoted prices for identical instruments in active markets; • Level 2 —Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and • Level 3 —Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Under GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring basis. Our assets and liabilities that are adjusted to fair value on a recurring basis are investments in money market mutual funds, trading securities, derivative instruments, and deferred compensation liabilities. The fair values of our investments in money market mutual funds, trading securities, and deferred compensation liabilities are determined using quoted market prices from daily exchange traded markets on the closing price as of the balance sheet date and are classified as Level 1. The fair values of our derivative instruments are determined using standard valuation models. The significant inputs used in these models are readily available in public markets, or can be derived from observable market transactions, and therefore have been classified as Level 2. Inputs used in these standard valuation models for derivative instruments include the applicable forward rates, interest rates and discount rates. Included in the fair value of derivative instruments is an adjustment for nonperformance risk. The adjustment for nonperformance risk did not have a significant impact on the estimated fair value of our derivative instruments. For additional disclosures related to our derivative instruments, see Derivative financial instruments below. The following tables summarize our assets and liabilities measured at fair value on a recurring basis using the following levels of inputs as of March 31, 2017 and December 31, 2016 as indicated (in thousands): p Fair Value Measurements at March 31, 2017: Total Level 1 Level 2 Level 3 Assets: Cash equivalents - Money market mutual funds $ 50,248 $ 50,248 $ — $ — Trading securities held in a “rabbi trust” (1) 63 63 — — Total assets $ 50,311 $ 50,311 $ — $ — Liabilities: Derivatives (2) $ 1,570 $ — $ 1,570 $ — Deferred compensation accrual “rabbi trust” (3) 65 65 — — Total liabilities $ 1,635 $ 65 $ 1,570 $ — Fair Value Measurements at December 31, 2016: Total Level 1 Level 2 Level 3 Assets: Cash equivalents - Money market mutual funds $ 75,177 $ 75,177 $ — $ — Trading securities held in a “rabbi trust” (1) 58 58 — — Total assets $ 75,235 $ 75,235 $ — $ — Liabilities: Derivatives (2) $ 1,816 $ — $ 1,816 $ — Deferred compensation accrual “rabbi trust” (3) 61 61 — — Total liabilities $ 1,877 $ 61 $ 1,816 $ — ___________________________________________ (1) — Trading securities held in a rabbi trust are included in Prepaids and other current assets and Other long-term assets, net in the consolidated balance sheets. (2) — Derivative financial instruments are included in Other current liabilities, net and Other long-term liabilities in the consolidated balance sheets. (3) — Non qualified deferred compensation in a rabbi trust is included in Accrued liabilities and Other long-term liabilities in the consolidated balance sheets. Our other financial instruments, including cash, restricted cash, accounts receivable, accounts payable, accrued liabilities, finance obligations and debt are carried at cost, which approximates their fair value. |
Accounts receivable | Accounts receivable Accounts receivable consist primarily of trade amounts due from customers in the United States and from uncleared credit card transactions at period end. Accounts receivable are recorded at invoiced amounts and do not bear interest. |
Allowance for doubtful accounts | Allowance for doubtful accounts From time to time, we grant credit to some of our business customers on normal credit terms (typically 30 days). We maintain an allowance for doubtful accounts receivable based upon our business customers’ financial condition and payment history, and our historical collection experience and expected collectability of accounts receivable. |
Concentration of credit risk | Concentration of credit risk Cash equivalents include short-term, highly liquid instruments with maturities at date of purchase of three months or less. At March 31, 2017 and December 31, 2016 , two banks held the majority of our cash and cash equivalents. We do not believe that, as a result of this concentration, we are subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships. Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash equivalents and receivables. We invest our cash primarily in money market securities which are uninsured. |
Valuation of inventories | Valuation of inventories Inventories, consisting of merchandise purchased for resale, are accounted for using a standard costing system which approximates the first-in-first-out (“FIFO”) method of accounting, and are valued at the lower of cost and net realizable value. We write down our inventory for damage or estimated obsolescence and to lower of cost and net realizable value based upon assumptions about future demand market conditions and fulfillment costs. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Once established, the original cost of the inventory less the related inventory allowance represents the new cost basis of such products. Reversal of the allowance is recognized only when the related inventory has been sold or scrapped. |
Prepaid inventories, net | Prepaid inventories, net Prepaid inventories, net represent inventories paid for in advance of receipt. |
Prepaids and other assets | Prepaids and other current assets Prepaids and other current assets represent expenses paid prior to receipt of the related goods or services, including advertising, license fees, maintenance, packaging, insurance, and other miscellaneous costs. |
Fixed assets | Fixed assets, net Fixed assets, which include assets such as our corporate headquarters, land improvements, building machinery and equipment, furniture and equipment, technology infrastructure, internal-use software, website development and leasehold improvements, are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets or the term of the related capital lease, whichever is shorter, as follows: Life (years) Building 40 Land improvements 20 Building machinery and equipment 15-20 Furniture and equipment 5-7 Computer hardware 3-4 Computer software 2-4 Leasehold improvements are amortized over the shorter of the term of the related leases or estimated useful lives. Included in fixed assets is the capitalized cost of internal-use software and website development, including software used to upgrade and enhance our Website and processes supporting our business. We capitalize costs incurred during the application development stage of internal-use software and amortize these costs over the estimated useful life of two to three years. Costs incurred related to design or maintenance of internal-use software are expensed as incurred. |
Cost and equity method investments | Cost method investments At March 31, 2017 , we held minority interests (less than 20%) in seven privately held entities, which include PeerNova, Bitt, IdentityMind, Factom, MarkaVIP, View, Inc., and Ripio. The total aggregate amount of these investments (excluding any adjustments for impairment) was approximately $15.1 million . Based on the nature of one of our investments, we have a variable interest. However, because we do not have power to direct the investee's activities and we are not the investee's primary beneficiary, we therefore do not consolidate the investee in our financial statements. These investments are recognized as cost method investments included in Other long-term assets, net in our consolidated balance sheets. Earnings from the investments are recognized to the extent of dividends received, and we will recognize subsequent impairments to the investment if they are other than temporary. We review these investments individually for impairment by evaluating if events or circumstances have occurred that may have a significant adverse effect on their fair value. If such events or circumstances have occurred, we will estimate the fair value of the investment and determine if any decline in the fair value of the investment below its carrying value is other-than-temporary. In such cases, the estimated fair value of the investment is determined using unobservable inputs including assumptions by the investee's management. These inputs are classified as Level 3. See Fair value of financial instruments above. Because several of our investees are in the early startup or development stages, these entities are subject to potential changes in cash flows, valuation, and inability to attract new investors which may be necessary for the liquidity needed to support their operations. At March 31, 2017 , the carrying amount of our cost method investments was approximately $7.7 million . We recognized a $2.9 million impairment loss on one of these investments during 2016, which consisted of the entire carrying amount of the investment. We recognized a $4.5 million impairment loss on another one of these investments during the three months ended March 31, 2017 . These impairment losses were recorded in Other income (expense), net on the consolidated statements of operations. Noncontrolling interests During 2014, we formed tØ.com, Inc. (formerly Medici, Inc.) to develop blockchain and fintech technology as part of our Medici initiatives. tØ.com is a majority owned subsidiary of Overstock. During 2016, tØ.com completed the acquisition of a financial technology firm and two registered broker dealers, each of which was under common control with the firm from which the financial technology assets were purchased. The former owners of that firm hold noncontrolling interests in tØ.com. These transactions are described further in Note 3—Acquisitions, Goodwill, and Acquired Intangible Assets. The proceeds for the acquisitions were financed by tØ.com through a note payable to Overstock that bears interest at a rate that approximates the Federal Funds Rate. tØ.com is included in our consolidated financial statements. Intercompany transactions have been eliminated and the amounts of contributions and gains or losses that are attributable to the noncontrolling interests are disclosed in our consolidated financial statements. |
Leases | Leases We account for lease agreements as either operating or capital leases depending on certain defined criteria. In certain of our lease agreements, we receive rent holidays and other incentives. We recognize lease costs on a straight-line basis without regard to deferred payment terms, such as rent holidays, that defer the commencement date of required payments. Additionally, tenant improvement allowances are amortized as a reduction in rent expense over the term of the lease. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the life of the lease, without assuming renewal features, if any, are exercised. |
Treasury stock | Treasury stock We account for treasury stock under the cost method and include treasury stock as a component of stockholders’ equity. |
Precious Metals | Precious metals Our precious metals consisted of $5.9 million in gold and $4.0 million in silver at March 31, 2017 and December 31, 2016 . We store our precious metals at an off-site secure facility. Because these assets consist of actual precious metals, rather than financial instruments, we account for them as an investment initially recorded at cost (including transaction fees) and then adjusted to the lower of cost or market based on an average unit cost. On an interim basis, we recognize decreases in the value of these assets caused by market declines. Subsequent increases in the value of these assets through market price recoveries during the same fiscal year are recognized in the later interim period, but may not exceed the total previously recognized decreases in value during the same year. Gains or losses resulting from changes in the value of our precious metal assets are recorded in Other income (expense), net in our consolidated statements of operations. |
Goodwill | Goodwill Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business combinations. Goodwill is not amortized but is tested for impairment at least annually. When evaluating whether goodwill is impaired, we make a qualitative assessment to determine if it is more likely than not that its fair value is less than its carrying amount. If the qualitative assessment determines that it is more likely than not that its fair value is less than its carrying amount, we compare the fair value of the reporting unit to which the goodwill is assigned to its carrying amount. If the carrying amount exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss, if any, is calculated by comparing the implied fair value of the goodwill to its carrying amount. In calculating the implied fair value of goodwill, the fair value of the reporting unit is allocated to the other assets and liabilities within the reporting unit based on estimated fair value. The excess of the fair value of a reporting unit over the amount allocated to its other assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized when the carrying amount of goodwill exceeds its implied fair value. In accordance with this guidance, we test for impairment of goodwill annually or when we deem that a triggering event has occurred. There were no impairments to goodwill recorded during the three months ended March 31, 2017 or the year ended December 31, 2016 . |
Intangible assets other than goodwill | Intangible assets other than goodwill We capitalize and amortize intangible assets other than goodwill over their estimated useful lives unless such lives are indefinite. Intangible assets other than goodwill acquired separately from third-parties are capitalized at cost while such assets acquired as part of a business combination are capitalized at their acquisition-date fair value. Intangible assets other than goodwill are amortized using the straight line method of amortization over their useful lives, with the exception of certain intangibles (such as acquired technology, customer relationships, and trade names) which are amortized using an accelerated method of amortization based on cash flows. These assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable as described below under Impairment of long-lived assets . |
Impairment of long-lived assets | Impairment of long-lived assets We review property and equipment and other long-lived assets, including intangible assets other than goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability is measured by comparison of the assets’ carrying amount to future undiscounted net cash flows the asset group is expected to generate. Cash flow forecasts are based on trends of historical performance and management’s estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions. If such asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair values. |
Other long-term assets, net | Other long-term assets, net Other long-term assets, net consist primarily of cost method investments (see Cost method investments above) and related convertible notes and long-term prepaid expenses. |
Derivative financial instruments | Derivative financial instruments In 2014, we entered into a loan agreement in connection with the construction of our new corporate headquarters. We began borrowing under the facility in October 2015. Because amounts borrowed on the loan will carry a variable LIBOR-based interest rate, we will be affected by changes in certain market conditions. These changes in market conditions may adversely impact our financial performance, and as such, we use derivatives as a risk management tool to mitigate the potential impact of these changes. We do not enter into derivatives for speculative or trading purposes. The primary market risk we manage through the use of derivative instruments is interest rate risk on the amounts we have borrowed under the loan agreement relating to our new headquarters. To manage that risk, we use interest rate swap agreements. An interest rate swap agreement is a contract between two parties to exchange cash flows based on underlying notional amounts and indices. Our interest rate swaps entitle us to pay amounts based on a fixed rate in exchange for receipt of amounts based on variable rates over the term of the related loan agreement. The notional amounts under our hedges were $45.6 million and $45.8 million at March 31, 2017 and December 31, 2016 , respectively. Our derivatives are carried at fair value in our consolidated balance sheets in Other current liabilities, net and Other long-term liabilities on a gross basis. The accounting for gains and losses that result from changes in the fair values of derivative instruments depends on whether the derivatives have been designated and qualify as hedging instruments under GAAP. Our derivatives have been designated and qualify as cash flow hedges. We formally designated and documented, at inception, the financial instruments as hedges of specific underlying exposures, the risk management objectives, and the strategy for undertaking the hedging transactions. In addition, we formally assess, both at the inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are effective at offsetting changes in the cash flows of the related underlying exposures. To the extent that the hedges are effective, the changes in fair values of our cash flow hedges are recorded in Accumulated other comprehensive income (loss) in the consolidated statements of changes in stockholders' equity. Any ineffective portion is immediately recognized into earnings. The variable-rate interest on the borrowing for our new corporate headquarters was capitalized during the construction period. The amounts in Accumulated other comprehensive income (loss) related to the cash flow hedge of the variability of the interest that was capitalized is reclassified into earnings over the depreciable life of the asset. During the three months ended March 31, 2016 , the amount of gains or losses in accumulated other comprehensive income (loss) that has been reclassified into earnings was not material and the amounts at March 31, 2017 that we will reclassify into earnings within the next 12 months is not expected to be material. We determine the fair values of our derivatives based on quoted market prices or using standard valuation models (see Fair value of financial instruments above). The notional amounts of the derivative financial instruments do not necessarily represent amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the financial risks described above. The amounts exchanged are calculated by reference to the notional amounts and by other terms of the derivatives, such as interest rates. |
Revenue recognition | Revenue recognition We derive our revenue primarily from direct revenue and partner revenue from merchandise sales. We also earn revenue from advertising on our website and from other pages. We have organized our operations into two principal reporting segments based on the primary source of revenue: direct revenue and partner revenue (see Note 9—Business Segments). Revenue is recognized when the following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or the service has been provided; (3) the selling price or fee revenue earned is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. Revenue related to merchandise sales is recognized upon delivery to our customers. As we ship high volumes of packages through multiple carriers, it is not practical for us to track the actual delivery date of each shipment. Therefore, we use estimates to determine which shipments are delivered and, therefore, recognized as revenue at the end of the period. Our delivery date estimates are based on average shipping transit times, which are calculated using the following factors: (i) the type of shipping carrier (as carriers have different in-transit times); (ii) the fulfillment source (either our warehouses, those warehouses we control, or those of our partners); (iii) the delivery destination; and (iv) actual transit time experience, which shows that delivery date is typically one to eight business days from the date of shipment. We review and update our estimates on a quarterly basis based on our actual transit time experience. However, actual shipping times may differ from our estimates. We evaluate the criteria outlined in ASC Topic 605-45, Principal Agent Considerations , in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. When we are the primary obligor in a transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, or have several but not all of these indicators, revenue is recorded gross. If we are not the primary obligor in the transaction and amounts earned are determined using a fixed percentage, revenue is recorded on a net basis. Currently, the majority of both direct revenue and partner revenue is recorded on a gross basis, as we are the primary obligor. We present revenue net of sales taxes. We periodically provide incentive offers to our customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases and other similar offers, which, when used by customers, are treated as a reduction of revenue. We evaluate the revenue recognition criteria above for our broker dealer subsidiaries (see Note 10—Broker Dealers) and we recognize securities transactions (and the related commission revenue) on a trade date and gross basis. Based upon our historical experience, direct and partner revenues typically increase during the fourth quarter because of the holiday retail season and decrease in the following quarter(s). Direct revenue Direct revenue is derived from merchandise sales of our owned inventory to individual consumers and businesses. Direct revenue comes from merchandise sales that occur primarily through our Website, but may also occur through offline and other channels. Partner and other revenue Partner and other revenue is derived primarily from merchandise sales of inventory owned by our partners which they generally ship directly to our consumers and businesses. Partner and other revenue comes from merchandise sales that occur primarily through our Website, but may also occur through offline and other channels, including through our broker dealer subsidiaries in our Other segment. Club O loyalty program We have a customer loyalty program called Club O Gold for which we sell annual memberships. For Club O Gold memberships, we record membership fees as deferred revenue and we recognize revenue ratably over the membership period. The Club O Gold loyalty program allows members to earn Club O Reward dollars for qualifying purchases made on our Website. We also have a co-branded credit card program (see Co-branded credit card program below for more information). Co-branded cardholders are also Club O Gold members and earn additional reward dollars for purchases made on our Website, and from other merchants. Earned Club O Reward dollars may be redeemed on future purchases made through our Website. We recognize revenue for Club O Reward dollars when customers redeem their reward dollars as part of a purchase on our Website. We account for these transactions as multiple element arrangements and allocate revenue to the elements using their relative fair values. We include the value of reward dollars earned in deferred revenue and we record it as a reduction of revenue at the time the reward dollars are earned. Club O Gold membership reward dollars expire 90 days after the customer’s Club O Gold membership expires. When Club O Reward dollars expire, we recognize reward dollar breakage as Other income (expense), net in our consolidated statements of operations. Beginning in 2015, we enrolled a significant number of members in Club O Silver, a newly introduced Club O membership tier for customers who agree to receive promotional emails. Club O Silver members earned Club O Rewards on qualifying purchases that expire after 90 days from a qualifying purchase. We discontinued Club O Silver in October 2016, and as a result we do not expect further Club O Silver rewards breakage in the future. In instances where customers receive free Club O Reward dollars not associated with any purchases, we account for these transactions as sales incentives such as coupons and record a reduction of revenue at the time the reward dollars are redeemed. Co-branded credit card program We have a co-branded credit card agreement with a commercial bank for the issuance of credit cards bearing the Overstock.com brand, under which the bank pays us fees for new accounts and for customer usage of the cards. The agreement also provides for a customer loyalty program offering reward points that customers will accrue from card usage and can use to make purchases on our Website (see Club O loyalty program above for more information). New account fees are recognized as revenue on a straight-line basis over the estimated expected life of co-branded credit card customers. Credit card usage fees are recognized as revenues as actual credit card usage occurs. We also have a private label credit card agreement with another commercial bank for the issuance of credit cards bearing our brand, but that is only available for use on our Website. In connection with the agreement, we received upfront fees that we recognize as revenue on a straight line basis over the term of the agreement, which runs through February 2022. When customers make regular revolving purchases using the card, we receive fees, which are recognized as revenue. When we offer promotional financing for purchases made with the card (for example, 12 months same as cash), we pay a discount fee to the commercial bank, which we recognize as a reduction of revenue. The commercial bank owns all of the accounts under the program and performs all account administration, underwriting and servicing. Fees and royalties from new accounts, credit card usage fees, and fees from both of these cards were less than 1% of total net revenues for all periods presented. Deferred revenue Customer orders are recorded as deferred revenue prior to delivery of products or services ordered. We record amounts received for Club O Gold membership fees as deferred revenue and we recognize it ratably over the membership period. We record Club O Reward dollars earned from purchases as deferred revenue at the time they are earned and we recognize it as revenue upon redemption. If reward dollars are not redeemed, we recognize other income upon expiration. In addition, we sell gift cards and record related deferred revenue at the time of the sale. We sell gift cards without expiration dates and we recognize revenue from a gift card upon redemption of the gift card. If a gift card is not redeemed, we recognize other income when the likelihood of its redemption becomes remote based on our historical redemption experience. We consider the likelihood of redemption to be remote after 36 months . We periodically enter into agreements with other parties to jointly market ancillary products or services on our website. As a result of those agreements, we sometimes receive payments in advance of performing our obligations under those agreements. Such payments received before we perform our obligations are initially recorded as deferred revenue and then recognized over our service period. |
Sales returns allowance | Sales returns allowance We inspect returned items when they arrive at our processing facility. We refund the full cost of the merchandise returned and all original shipping charges if the returned item is defective or we or our partners have made an error, such as shipping the wrong product. If the return is not a result of a product defect or a fulfillment error and the customer initiates a return of an unopened item within 30 days of delivery, for most products we refund the full cost of the merchandise minus the original shipping charge and actual return shipping fees. However, we reduce refunds for returns initiated more than 30 days after delivery or that are received at our returns processing facility more than 45 days after initial delivery. If our customer returns an item that has been opened or shows signs of wear, we issue a partial refund minus the original shipping charge and actual return shipping fees. Revenue is recorded net of estimated returns. We record an allowance for returns based on current period revenues and historical returns experience. We analyze actual historical returns, current economic trends and changes in order volume and acceptance of our products when evaluating the adequacy of the sales returns allowance in any accounting period. |
Credit card chargeback allowance | Credit card chargeback allowance Revenue is recorded net of credit card chargebacks. We maintain an allowance for credit card chargebacks based on current period revenues and historical chargeback experience. |
Cost of goods sold | Cost of goods sold Cost of goods sold includes product costs, warehousing costs, outbound shipping costs, handling and fulfillment costs, customer service costs and credit card fees, and is recorded in the same period in which related revenues have been recorded. |
Advertising expense | Advertising expense We expense the costs of producing advertisements the first time the advertising takes place and expense the cost of communicating advertising in the period during which the advertising space or airtime is used. Internet advertising expenses are recognized as incurred based on the terms of the individual agreements, which are generally: 1) a commission for traffic driven to the Website that generates a sale or 2) a referral fee based on the number of clicks on keywords or links to our Website generated during a given period. |
Stock-based compensation | Stock-based compensation We measure compensation expense for all outstanding unvested share-based awards at fair value on the date of grant and recognize compensation expense over the service period for awards at the greater of a straight line basis or on an accelerated schedule when vesting of restricted stock awards exceeds a straight line basis. As a result of the adoption of ASU No. 2016-09, we made an accounting policy election to record forfeitures when they occur. When an award is forfeited prior to the vesting date, we recognize an adjustment for the previously recognized expense in the period of the forfeiture. See Note 8—Stock-Based Awards. |
Self-funded health insurance | Self-funded health insurance As of January 1, 2017, we established a partially self-funded health insurance plan for our employees. We maintain a stop-loss insurance policy through an insurance company that limits our losses both on a per employee basis and an aggregate basis. Although we intend to maintain this plan indefinitely, we may terminate, modify, suspend, or discontinue this plan at any time and for any reason. We are responsible for estimating our liability for unpaid costs of insured events that have occurred, which includes known cases on a case-by-case basis, and also for events that have occurred, but have not yet been reported. As of March 31, 2017 , we have recorded an accrued liability of approximately $1.2 million . Actual claims may differ from the estimate and any difference could be significant. This accrual is included in accrued liabilities in the accompanying consolidated balance sheets. |
Loss contingencies | Loss contingencies In the normal course of business, we are involved in legal proceedings and other potential loss contingencies. We accrue a liability for such matters when it is probable that a loss has been incurred and the amount can be reasonably estimated. When only a range of probable loss can be estimated, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. We expense legal fees as incurred (see Note 6—Commitments and Contingencies). |
Income taxes | Income taxes Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate adjusted for discrete items, if any, for relevant interim periods. We update our estimate of the annual effective tax rate each quarter and make cumulative adjustments if our estimated annual effective tax rate changes. Our quarterly tax provision and our quarterly estimate of our annual effective tax rate are subject to significant variations due to several factors including variability in predicting our pre-tax and taxable income and the mix of jurisdictions to which those items relate, relative changes of expenses or losses for which tax benefits are not recognized, how we do business, fluctuations in our stock price, and changes in law, regulations, and administrative practices. Our effective tax rate can be volatile based on the amount of pre-tax income. For example, the impact of discrete items on our effective tax rate is greater when pre-tax income is lower. We assess the available positive and negative evidence to estimate whether we will generate sufficient future taxable income to use our existing deferred tax assets. We consider, among other things, our recent financial and operating results (three years of cumulative income and revenue growth during those periods), along with our forecasted growth rates, projected future taxable income, and prudent and feasible tax planning strategies. We perform sensitivity analyses to address how potential changes in significant assumptions would impact our ability to generate the minimum amount of taxable income required. We give the most weight to objective evidence related to our more recent financial results. Based upon the level of historical taxable income and projections for future taxable income, and planned tax strategies over the periods in which the deferred tax assets are deductible, we believe it is more likely than not that we will realize the benefits of these deduction differences, net of existing valuation allowances. However, it is possible that certain state tax credits could ultimately expire unused if estimates of future apportioned taxable income during the carryforward period are reduced. We will continue to monitor the need for a valuation allowance against our federal and state deferred tax assets on a quarterly basis. We have not provided for U.S. income tax on certain foreign earnings because we intend to indefinitely reinvest these earnings outside the U.S. We have begun expansion of operations outside of the U.S. and have plans for additional expansion for which we have incurred and will continue to incur capital requirements. We have considered ongoing capital requirements of the parent company in the U.S. |
Net income per share | Net income per share In 2016, we issued shares of our Blockchain Voting Series A Preferred Stock and our Voting Series B Preferred Stock (collectively the “preferred shares”). These shares are considered participating securities, and as a result, net income per share is calculated using the two-class method. Under this method, we give effect to preferred dividends and then allocate remaining net income attributable to our stockholders to both common shares and participating securities (based on the percentages outstanding) in determining net income per common share. Basic net income per common share is computed by dividing net income attributable to common shares (after allocating between common shares and participating securities) by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to common shares (after allocating between common shares and participating securities) by the weighted average number of common and potential common shares outstanding during the period (after allocating total dilutive shares between our common shares outstanding and our preferred shares outstanding). Potential common shares, comprising incremental common shares issuable upon the exercise of stock options and restricted stock awards are included in the calculation of diluted earnings per common share to the extent such shares are dilutive. T |
Stock repurchase program | Stock repurchase program On May 5, 2015, our Board of Directors authorized a stock repurchase program under which we may repurchase shares of our outstanding common stock for up to $25 million at any time through December 31, 2017. During Q1 2017, we repurchased approximately 604,000 shares of our common stock for an aggregate purchase price of $10 million under the stock repurchase plan. All common shares repurchased were recognized as treasury stock. |
Recently issued accounting standards | Recently adopted accounting standards In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory , which requires inventory to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We implemented the provisions of ASU 2015-11 on January 1, 2017 on a prospective basis. The implementation of ASU 2015-11 did not impact our results of operations or cash flows. In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes , which requires that deferred tax assets and liabilities be classified as noncurrent in a classified balance sheet. We implemented the provisions of ASU 2015-17 on January 1, 2017 on a retrospective basis. Amounts related to the implementation for the year ended December 31, 2016 totaled approximately $16.3 million and have been reclassified to long-term Deferred tax assets, net in our consolidated balance sheet. The implementation of ASU 2015-17 did not impact our results of operations or cash flows. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting , which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. We implemented the provisions of ASU 2016-09 on January 1, 2017 on a modified retrospective basis. We recognized $9.4 million of additional deferred tax assets related to excess tax benefits through a cumulative effect adjustment in retained earnings as of January 1, 2017. We will recognize future excess tax benefits or tax deficiencies related to the vesting of stock-based compensation awards as income tax benefit or income tax expense. This is likely to cause volatility in our effective tax rate and income tax expense. As part of our implementation of this standard, we also made a policy election to recognize forfeitures as they occur under a modified retrospective approach which did not have a significant impact on our results of operations or cash flows. Our adoption of the other provisions of this standard, which will be applied prospectively, did not have a significant impact on our results of operations or cash flows. Recently issued accounting standards not yet adopted In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers , which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard becomes effective for us on January 1, 2018. Early adoption is permitted. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers - Principal versus Agent Considerations . This ASU clarifies the implementation guidance for principal versus agent considerations in ASU No. 2014-09 and provides indicators that assist in the assessment of control. ASU No. 2016-08 is also effective for us on January 1, 2018. In 2016, the FASB issued additional implementation guidance for the new revenue recognition standards. These standards permit the use of either the retrospective or cumulative effect transition method. We are continuing our assessment of our revenue streams and our project plan for implementing these standards. We have not yet selected a transition method nor have we completed our assessment of the effect that ASU No. 2014-09 will have on our consolidated financial statements and related disclosures. At this stage in our assessment, we have identified gross versus net revenue recognition (principal versus agent considerations) and the timing of revenue recognition (FOB shipping point versus FOB destination) as potentially significant issues in our analysis. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , which, among other things, requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The new standard also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard becomes effective for us on January 1, 2019. Early adoption is permitted. The amendments in this update should be applied under a modified retrospective approach. We are evaluating the effect that ASU No. 2016-02 will have on our consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU No. 2016-04, Liabilities - Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products , which specifies how prepaid stored-value product liabilities, such as gift cards, should be derecognized. The standard, among other things, requires derecognition of such liabilities through expected breakage in proportion to the pattern of rights expected to be exercised by the holder, but only to the extent that it is probable that a significant reversal of the recognized breakage amount will not subsequently occur. The new standard becomes effective for us on January 1, 2018. Early adoption is permitted. The amendments in this update should be applied under a modified retrospective approach or a retrospective approach to each period presented. We are evaluating the effect that ASU No. 2016-04 will have on our consolidated financial statements and related disclosures. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) , which provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows, thereby reducing the diversity in practice. The new standard becomes effective for us on January 1, 2018. The standard requires entities to apply this standard using the retrospective transition method to each period presented. The adoption of this standard will require that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown in the statement of cash flows. We do not expect that ASU No. 2016-18 will have a material impact on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update) , which provides the SEC staff view that a registrant should evaluate ASUs that have not yet been adopted to determine the appropriate financial statement disclosures about the potential material effects of those ASUs on the financial statements when adopted. We do not expect that ASU 2017-03 will have a material impact on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU No. 2017-04, Intangibles, Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , which simplifies the manner in which an entity should perform its annual, or interim, goodwill impairment test. The new standard becomes effective for us on January 1, 2020. Early adoption is permitted. We have not yet determined whether to early adopt. The amendments in this update should be applied on a prospective basis. We do not expect that ASU No. 2017-04 will have a material impact on our consolidated financial statements and related disclosures. |
ACCOUNTING POLICIES (Tables)
ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Schedule of fair value of financial instruments using levels of inputs | The following tables summarize our assets and liabilities measured at fair value on a recurring basis using the following levels of inputs as of March 31, 2017 and December 31, 2016 as indicated (in thousands): p Fair Value Measurements at March 31, 2017: Total Level 1 Level 2 Level 3 Assets: Cash equivalents - Money market mutual funds $ 50,248 $ 50,248 $ — $ — Trading securities held in a “rabbi trust” (1) 63 63 — — Total assets $ 50,311 $ 50,311 $ — $ — Liabilities: Derivatives (2) $ 1,570 $ — $ 1,570 $ — Deferred compensation accrual “rabbi trust” (3) 65 65 — — Total liabilities $ 1,635 $ 65 $ 1,570 $ — Fair Value Measurements at December 31, 2016: Total Level 1 Level 2 Level 3 Assets: Cash equivalents - Money market mutual funds $ 75,177 $ 75,177 $ — $ — Trading securities held in a “rabbi trust” (1) 58 58 — — Total assets $ 75,235 $ 75,235 $ — $ — Liabilities: Derivatives (2) $ 1,816 $ — $ 1,816 $ — Deferred compensation accrual “rabbi trust” (3) 61 61 — — Total liabilities $ 1,877 $ 61 $ 1,816 $ — ___________________________________________ (1) — Trading securities held in a rabbi trust are included in Prepaids and other current assets and Other long-term assets, net in the consolidated balance sheets. (2) — Derivative financial instruments are included in Other current liabilities, net and Other long-term liabilities in the consolidated balance sheets. (3) — Non qualified deferred compensation in a rabbi trust is included in Accrued liabilities and Other long-term liabilities in the consolidated balance sheets. |
Schedule of estimated useful lives of the fixed assets | Fixed assets, which include assets such as our corporate headquarters, land improvements, building machinery and equipment, furniture and equipment, technology infrastructure, internal-use software, website development and leasehold improvements, are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets or the term of the related capital lease, whichever is shorter, as follows: Life (years) Building 40 Land improvements 20 Building machinery and equipment 15-20 Furniture and equipment 5-7 Computer hardware 3-4 Computer software 2-4 |
Schedule of depreciation and amortization expense which is classified within the corresponding operating expense categories on the consolidated statements of income | Depreciation expense is classified within the corresponding operating expense categories on the consolidated statements of operations as follows (in thousands): Three months ended 2017 2016 Cost of goods sold - direct $ 83 $ 77 Technology 6,685 5,920 General and administrative 930 192 Total depreciation, including internal-use software and website development $ 7,698 $ 6,189 |
Schedule of intangible assets | Intangible assets, net consist of the following (in thousands): March 31, 2017 December 31, 2016 Acquired intangible assets $ 16,000 $ 16,000 Intangible assets, other (1) 1,487 1,356 17,487 17,356 Less: accumulated amortization of intangible assets (7,388 ) (6,443 ) Total intangible assets, net $ 10,099 $ 10,913 ___________________________________________ (1) — At March 31, 2017, the weighted average remaining useful life for intangible assets, other, excluding fully amortized intangible assets, was 3.50 years. |
Intangible assets amortization expense | Amortization of intangible assets other than goodwill is classified within the corresponding operating expense categories on the consolidated statements of operations as follows (in thousands): Three months ended March 31, 2017 2016 Technology $ 905 $ 726 Sales and marketing 20 350 General and administrative 20 22 Total amortization $ 945 $ 1,098 |
Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location | The following table shows the effect of derivative financial instruments that were designated as accounting hedges for the period indicated (in thousands): Cash flow hedges Amount of gain (loss) recognized in OCI on derivative (effective portion) net of tax Location of gain (loss) reclassified from Accumulated OCI into operations (effective portion) Amount of gain (loss) reclassified from Accumulated OCI into operations (effective portion) Location of gain (loss) recognized in operations on derivative (ineffective portion) Amount of gain (loss) recognized in operations on derivative (ineffective portion) Three months ended March 31, 2017 Interest rate swap $ 149 Interest expense $ 4 Other income (expense) $ — Three months ended March 31, 2016 Interest rate swap $ (1,020 ) Interest expense $ — Other income (expense) $ — |
Schedule of Interest Rate Derivatives | The following table provides the outstanding notional balances and fair values of derivative financial instruments that were designated as accounting hedges outstanding positions for the dates indicated, and recorded gains (losses) during the periods indicated (in thousands): Cash flow hedges Location in balance sheet Expiration date Outstanding notional Fair value Beginning gains (losses) Gains (losses) recorded during period (1) Ending gains (losses) Three months ended March 31, 2017 Interest rate swap Current and Other long-term liabilities 2023 $ 45,573 $ (1,570 ) $ (1,816 ) $ 246 $ (1,570 ) Three months ended March 31, 2016 Interest rate swap Current and Other long-term liabilities 2023 $ 34,097 $ (3,991 ) $ (2,397 ) $ (1,594 ) $ (3,991 ) ___________________________________________ (1) — Gains (losses) recorded during the period are presented gross of the related tax impact. |
Schedule of costs of goods sold, including product cost and other costs and fulfillment and related costs | Cost of goods sold, including product cost and other costs and fulfillment and related costs are as follows (in thousands): Three months ended 2017 2016 Total revenue, net $ 432,435 100 % $ 413,677 100 % Cost of goods sold Product costs and other cost of goods sold 326,803 76 % 318,074 77 % Fulfillment and related costs 18,725 4 % 18,296 4 % Total cost of goods sold 345,528 80 % 336,370 81 % Gross profit $ 86,907 20 % $ 77,307 19 % |
Schedule of computation of basic and diluted net income per common share | The following table sets forth the computation of basic and diluted net income per common share for the periods indicated (in thousands, except per share data): Three months ended March 31, 2017 2016 Net income (loss) attributable to stockholders of Overstock.com, Inc. $ (5,903 ) $ 13,429 Net income (loss) per common share—basic: Net income (loss) attributable to common shares—basic $ (0.23 ) $ 0.53 Weighted average common shares outstanding—basic 25,290 25,280 Effect of dilutive securities: Stock options and restricted stock awards — 10 Weighted average common shares outstanding—diluted 25,290 25,290 Net income (loss) attributable to common shares—diluted $ (0.23 ) $ 0.53 |
Schedule of anti-dilutive securities excluded from the calculation of diluted shares outstanding | The following shares were excluded from the calculation of diluted shares outstanding as their effect would have been anti-dilutive (in thousands): Three months ended March 31, 2017 2016 Stock options and restricted stock units 199 907 |
ACQUISITIONS, GOODWILL, AND A22
ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Business Combinations [Abstract] | |
Estimated Fair Values of Assets Acquired and Liabilities Assumed | The fair values of the assets acquired and liabilities assumed at the acquisition dates are as follows (in thousands): Purchase Price Fair Value Cash paid, net of cash acquired $ 9,353 Common stock issued 18,149 $ 27,502 Allocation Goodwill $ 11,914 Intangibles 16,000 Accounts receivable and other assets 2,565 Other liabilities assumed (2,977 ) $ 27,502 |
Intangible Assets Acquired and Useful Lives | The following table details the identifiable intangible assets acquired at their fair value and useful lives as of March 31, 2017 (amounts in thousands): Intangible Assets Fair Value Weighted Average Useful Life (years) Technology and developed software $ 13,600 4.38 Customer relationships 1,900 — Trade names 300 7.61 Other 200 Total acquired intangible assets at the acquisition dates 16,000 Less: accumulated amortization of acquired intangible assets (6,308 ) Total acquired intangible assets, net $ 9,692 |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Payables and Accruals [Abstract] | |
Schedule of accrued liabilities | Accrued liabilities consist of the following (in thousands): March 31, 2017 December 31, 2016 Accrued marketing expenses $ 20,627 $ 26,358 Accounts payable accruals 16,865 17,229 Allowance for returns 13,537 18,176 Accrued compensation and other related costs 11,764 8,903 Accrued loss contingencies 9,155 9,173 Other accrued expenses 6,176 6,315 Accrued freight 3,293 10,062 Total accrued liabilities $ 81,417 $ 96,216 |
BORROWINGS (Tables)
BORROWINGS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Future principal payments on borrowings | Future principal payments on the Term Loan as of March 31, 2017 , are as follows (in thousands): Payments due by period: 2017 (Remainder) $ 843 2018 1,124 2019 1,124 2020 1,124 2021 1,124 Thereafter 40,234 $ 45,573 Future principal payments of finance obligations as of March 31, 2017 , are as follows (in thousands): Payments due by period: 2017 (Remainder) $ 2,439 2018 3,356 2019 3,479 2020 3,502 2021 1,494 Thereafter — $ 14,270 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Summary of minimum future payments under all operating leases | Minimum future payments under all operating leases as of March 31, 2017 , are as follows (in thousands): Payments due by period 2017 (Remainder) $ 6,406 2018 6,686 2019 6,169 2020 4,056 2021 4,102 Thereafter 20,411 $ 47,830 |
STOCK-BASED AWARDS (Tables)
STOCK-BASED AWARDS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of restricted stock award activity | The following table summarizes restricted stock award activity during the three months ended March 31, 2017 (in thousands): Three months ended Units Weighted Outstanding—beginning of year 560 $ 17.44 Granted at fair value 254 16.90 Vested (143 ) 18.54 Forfeited (85 ) 16.22 Outstanding—end of period 586 $ 17.11 |
BUSINESS SEGMENTS (Tables)
BUSINESS SEGMENTS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Summary of information about reportable segments | The following table summarizes information about reportable segments for the three months ended March 31, 2017 and 2016 (in thousands): Three months ended Direct Partner Retail Total Other Total 2017 Revenue, net $ 22,828 $ 405,261 $ 428,089 $ 4,346 $ 432,435 Cost of goods sold 20,963 321,297 342,260 3,268 345,528 Gross profit $ 1,865 $ 83,964 $ 85,829 $ 1,078 $ 86,907 Operating expenses 84,538 4,682 89,220 Interest and other income (expense), net (1) 102 (4,411 ) (4,309 ) Pre-tax income (loss) 1,393 (8,015 ) (6,622 ) Provision (benefit) for income taxes 889 (1,229 ) (340 ) Net income (loss) (2) (3) (4) $ 504 $ (6,786 ) $ (6,282 ) 2016 Revenue, net $ 26,651 $ 384,269 $ 410,920 $ 2,757 $ 413,677 Cost of goods sold 25,406 309,297 334,703 1,667 336,370 Gross profit $ 1,245 $ 74,972 $ 76,217 $ 1,090 $ 77,307 Operating expenses 55,380 4,114 59,494 Interest and other income (expense), net (1) 4,245 — 4,245 Pre-tax income (loss) 25,082 (3,024 ) 22,058 Provision (benefit) for income taxes 10,045 (1,081 ) 8,964 Net income (loss) (2) (3) (4) $ 15,037 $ (1,943 ) $ 13,094 |
ACCOUNTING POLICIES (Details)
ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 | |
Cash equivalents | |||
Cash equivalents | $ 50,200 | $ 75,200 | |
Assets: | |||
Cash equivalents - Money market mutual funds | 50,248 | 75,177 | |
Trading securities held in a "rabbi trust" | [1] | 63 | 58 |
Total assets | 50,311 | 75,235 | |
Liabilities: | |||
Derivatives | [2] | 1,570 | 1,816 |
Deferred compensation accrual "rabbi trust" | [3] | 65 | 61 |
Total liabilities | 1,635 | 1,877 | |
Level 1 | |||
Assets: | |||
Cash equivalents - Money market mutual funds | 50,248 | 75,177 | |
Trading securities held in a "rabbi trust" | [1] | 63 | 58 |
Total assets | 50,311 | 75,235 | |
Liabilities: | |||
Derivatives | [2] | 0 | 0 |
Deferred compensation accrual "rabbi trust" | [3] | 65 | 61 |
Total liabilities | 65 | 61 | |
Level 2 | |||
Assets: | |||
Cash equivalents - Money market mutual funds | 0 | 0 | |
Trading securities held in a "rabbi trust" | [1] | 0 | 0 |
Total assets | 0 | 0 | |
Liabilities: | |||
Derivatives | [2] | 1,570 | 1,816 |
Deferred compensation accrual "rabbi trust" | [3] | 0 | 0 |
Total liabilities | 1,570 | 1,816 | |
Level 3 | |||
Assets: | |||
Cash equivalents - Money market mutual funds | 0 | 0 | |
Trading securities held in a "rabbi trust" | [1] | 0 | 0 |
Total assets | 0 | 0 | |
Liabilities: | |||
Derivatives | [2] | 0 | 0 |
Deferred compensation accrual "rabbi trust" | [3] | 0 | 0 |
Total liabilities | $ 0 | $ 0 | |
[1] | Trading securities held in a rabbi trust are included in Prepaids and other current assets and Other long-term assets, net in the consolidated balance sheets. | ||
[2] | Derivative financial instruments are included in Other current liabilities, net and Other long-term liabilities in the consolidated balance sheets. | ||
[3] | Non qualified deferred compensation in a rabbi trust is included in Accrued liabilities and Other long-term liabilities in the consolidated balance sheets. |
ACCOUNTING POLICIES (Details 2)
ACCOUNTING POLICIES (Details 2) $ in Millions | 3 Months Ended | |
Mar. 31, 2017USD ($)bank | Dec. 31, 2016USD ($)bank | |
Allowance for doubtful accounts | ||
Normal credit term granted to customers | 30 days | |
Allowance for doubtful accounts receivable | $ | $ 2.1 | $ 2 |
Concentration of credit risk | ||
Number of banks who hold majority of cash and cash equivalents | bank | 2 | 2 |
ACCOUNTING POLICIES (Details 3)
ACCOUNTING POLICIES (Details 3) | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2017USD ($)investmentsubsidiary | Mar. 31, 2016USD ($)subsidiary | Mar. 31, 2017USD ($)investmentsubsidiary | Dec. 31, 2016USD ($) | Mar. 31, 2016USD ($)subsidiary | |
Depreciation and amortization | |||||
Total depreciation and amortization, including internal-use software and website development | $ 7,698,000 | $ 6,189,000 | |||
Accumulated depreciation of fixed assets | $ (187,600,000) | $ (187,600,000) | $ (180,300,000) | ||
Cost method investments | |||||
Number of cost method investments (in investment) | investment | 7 | 7 | |||
Original amount of cost method investment | $ 15,100,000 | $ 15,100,000 | |||
Carrying amount of cost method investments | 7,700,000 | $ 7,700,000 | |||
Impairment on investment | $ 4,500,000 | 2,850,000 | |||
Number of broker-dealer subsidiaries (in subsidiary) | subsidiary | 2 | 2 | 2 | 2 | |
Disbursement of note receivable | $ 250,000 | $ 2,850,000 | $ 1,068,000 | $ 7,850,000 | |
Precious metals | |||||
Precious metals | 9,946,000 | 9,946,000 | 9,946,000 | ||
Unrealized gain (loss) on investment in precious metals | 0 | 0 | 201,000 | $ (1,183,000) | |
Goodwill | |||||
Impairments of goodwill | 0 | 0 | |||
Gold | |||||
Precious metals | |||||
Precious metals | 5,900,000 | 5,900,000 | 5,900,000 | ||
Silver | |||||
Precious metals | |||||
Precious metals | 4,000,000 | 4,000,000 | 4,000,000 | ||
Cost of goods sold — direct | |||||
Depreciation and amortization | |||||
Total depreciation and amortization, including internal-use software and website development | 83,000 | 77,000 | |||
Technology | |||||
Depreciation and amortization | |||||
Total depreciation and amortization, including internal-use software and website development | 6,685,000 | 5,920,000 | |||
General and administrative | |||||
Depreciation and amortization | |||||
Total depreciation and amortization, including internal-use software and website development | $ 930,000 | 192,000 | |||
Building | |||||
Fixed assets | |||||
Life | 40 years | ||||
Land improvements | |||||
Fixed assets | |||||
Life | 20 years | ||||
Machinery and Equipment [Member] | Minimum | |||||
Fixed assets | |||||
Life | 15 years | ||||
Machinery and Equipment [Member] | Maximum | |||||
Fixed assets | |||||
Life | 20 years | ||||
Computer software | Minimum | |||||
Fixed assets | |||||
Life | 2 years | ||||
Computer software | Maximum | |||||
Fixed assets | |||||
Life | 4 years | ||||
Computer hardware | Minimum | |||||
Fixed assets | |||||
Life | 3 years | ||||
Computer hardware | Maximum | |||||
Fixed assets | |||||
Life | 4 years | ||||
Furniture and equipment | Minimum | |||||
Fixed assets | |||||
Life | 5 years | ||||
Furniture and equipment | Maximum | |||||
Fixed assets | |||||
Life | 7 years | ||||
Internal-use software and website development | |||||
Additional Disclosure | |||||
Capitalized costs | $ 3,500,000 | 4,700,000 | |||
Amortization of capitalized costs | 4,300,000 | 3,800,000 | |||
Equipment under capital leases | |||||
Depreciation and amortization | |||||
Total depreciation and amortization, including internal-use software and website development | 1,300,000 | $ 699,000 | |||
Accumulated depreciation of fixed assets | (10,000,000) | (10,000,000) | (8,700,000) | ||
Additional Disclosure | |||||
Capital lease obligations | $ 21,500,000 | $ 21,500,000 | $ 21,500,000 |
ACCOUNTING POLICIES (Details 4)
ACCOUNTING POLICIES (Details 4) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Finite-Lived Intangible Assets | ||
Intangible assets, gross | $ 17,487 | $ 17,356 |
Less: accumulated amortization of acquired intangible assets | (7,388) | (6,443) |
Total intangible assets, net | 10,099 | 10,913 |
Acquired intangible assets | ||
Finite-Lived Intangible Assets | ||
Intangible assets, gross | 16,000 | 16,000 |
Intangible assets, other | ||
Finite-Lived Intangible Assets | ||
Intangible assets, gross | $ 1,487 | $ 1,356 |
Intangible assets, other | Weighted average | ||
Finite-Lived Intangible Assets | ||
Useful life of intangible assets | 3 years 6 months |
ACCOUNTING POLICIES (Details 5)
ACCOUNTING POLICIES (Details 5) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Finite-Lived Intangible Assets | ||||
Amortization of intangible assets | $ 945 | $ 1,098 | $ 3,815 | $ 2,649 |
Estimated amortization expense for the next five years | ||||
Remainder of 2017 | 2,800 | 2,800 | ||
2,018 | 2,800 | 2,800 | ||
2,019 | 2,000 | 2,000 | ||
2,020 | 1,300 | 1,300 | ||
2,021 | 900 | 900 | ||
Thereafter | 100 | $ 100 | ||
Technology | ||||
Finite-Lived Intangible Assets | ||||
Amortization of intangible assets | 905 | 726 | ||
Sales and marketing | ||||
Finite-Lived Intangible Assets | ||||
Amortization of intangible assets | 20 | 350 | ||
General and administrative | ||||
Finite-Lived Intangible Assets | ||||
Amortization of intangible assets | $ 20 | $ 22 |
ACCOUNTING POLICIES (Details 6)
ACCOUNTING POLICIES (Details 6) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | |||
Impairment of long-lived assets | $ 0 | $ 0 | |
Interest rate swap | Interest expense | Designated as Hedging Instrument | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Amount of gain (loss) recognized in OCI on derivative (effective portion) net of tax | 149,000 | $ (1,020,000) | |
Amount of gain (loss) reclassified from Accumulated OCI into operations (effective portion) | 4,000 | 0 | |
Amount of gain (loss) recognized in operations on derivative (ineffective portion) | 0 | 0 | |
Other long-term liabilities | Interest rate swap | Designated as Hedging Instrument | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Outstanding notional | 45,573,000 | 34,097,000 | 45,800,000 |
Fair value | (1,570,000) | (3,991,000) | |
Beginning gains (losses) | (1,816,000) | (2,397,000) | (2,397,000) |
Gains (losses) recorded during period | 246,000 | (1,594,000) | |
Ending gains (losses) | $ (1,570,000) | $ (3,991,000) | $ (1,816,000) |
ACCOUNTING POLICIES (Details 7)
ACCOUNTING POLICIES (Details 7) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017USD ($)segment | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($) | |
Revenue recognition | |||
Number of principal segments (in segment) | segment | 2 | ||
Product delivery period from date of shipment, minimum | 1 day | ||
Product delivery period from date of shipment, maximum | 8 days | ||
Co-branded credit card program | |||
Maximum revenue from co-branded credit card program as a percentage of total net revenues | 1.00% | 1.00% | |
Deferred revenue | |||
Likelihood of gift card redemption to be remote, period | 36 months | ||
Sales returns allowance | |||
Sales return period for which full refund will be granted | 30 days | ||
Sales return period for which reduced refund will be granted | 30 days | ||
Sales return received at returns processing facility for which reduced refund will be granted, period | 45 days | ||
Allowance for sales returns | $ 13,500 | $ 18,200 | |
Credit card chargeback allowance | |||
Credit card chargeback allowance | 301 | 431 | |
Cost of goods sold | |||
Total revenue, net | $ 432,435 | $ 413,677 | |
Total revenue, net (as a percent) | 100.00% | 100.00% | |
Cost of goods sold | |||
Product costs and other cost of goods sold | $ 326,803 | $ 318,074 | |
Fulfillment and related costs | 18,725 | 18,296 | |
Total cost of goods sold | $ 345,528 | $ 336,370 | |
Product costs and other cost of goods sold (as a percent) | 76.00% | 77.00% | |
Fulfillment and related costs (as a percent) | 4.00% | 4.00% | |
Total cost of goods sold (as a percent) | 80.00% | 81.00% | |
Gross profit | $ 86,907 | $ 77,307 | |
Gross profit (as a percent) | 20.00% | 19.00% | |
Advertising expense | |||
Advertising expense | $ 33,800 | $ 28,800 | |
Prepaid advertising expense | 1,200 | $ 843 | |
Self-funded health insurance | |||
Self-funded health insurance reserve | $ 1,200 | ||
Club O loyalty program, gold | |||
Club O loyalty program | |||
Expiration period of Club O reward dollars after expiration of the customer's membership | 90 days |
ACCOUNTING POLICIES (Details 8)
ACCOUNTING POLICIES (Details 8) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Earnings per share | ||
Net income attributable to common shares | $ (5,903) | $ 13,429 |
Net income (loss) per common share—basic: | ||
Net income attributable to common shares-basic (in dollars per share) | $ (0.23) | $ 0.53 |
Weighted average common shares outstanding-basic | 25,290 | 25,280 |
Effect of dilutive securities: | ||
Stock options and restricted stock awards (in shares) | 0 | 10 |
Weighted average common shares outstanding-diluted | 25,290 | 25,290 |
Net income attributable to common shares-diluted (in dollars per share) | $ (0.23) | $ 0.53 |
Stock options and restricted stock awards | ||
Anti-dilutive securities excluded from computation of earnings per share | ||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 199 | 907 |
ACCOUNTING POLICIES (Details 9)
ACCOUNTING POLICIES (Details 9) - USD ($) shares in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Dec. 31, 2016 | May 05, 2015 | |
Stock repurchase program | |||
Authorized amount under stock repurchase program | $ 25,000,000 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Deferred tax assets, net | $ 66,351,000 | $ 56,266,000 | |
Common stock | |||
Stock repurchase program | |||
Purchase of treasury stock (in shares) | 604 | ||
Purchases of treasury stock | $ (10,000,000) | ||
Accounting Standards Update 2015-17 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Deferred tax assets, net | 16,300,000 | ||
Accounting Standards Update 2016-09 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Cumulative effect of change in accounting principle | $ 9,400,000 |
ACQUISITIONS, GOODWILL, AND A37
ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Business Acquisition [Line Items] | |||||
Amortization expense, intangible assets | $ 945 | $ 1,098 | $ 3,815 | $ 2,649 | |
Common stock issued in business combination | 0 | 0 | $ 0 | $ 18,149 | |
Cirrus Technologies LLC | |||||
Business Acquisition [Line Items] | |||||
Purchase price (excluding cash acquired) | $ 29,700 | ||||
Payments to acquire business | $ 11,600 | ||||
Cash acquired | 2,200 | ||||
Number of common shares issued in business combination (in shares) | 908,364 | ||||
Common stock issued in business combination | $ 18,100 | ||||
Cirrus Technologies, SpeedRoute, And Pro Securities [Member] | |||||
Business Acquisition [Line Items] | |||||
Amortization expense, intangible assets | $ 925 | $ 1,100 | |||
Common stock issued in business combination | $ 18,149 |
ACQUISITIONS, GOODWILL, AND A38
ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Purchase Price | ||||||
Cash paid, net of cash acquired | $ 0 | $ (1,177) | $ (43) | $ 9,424 | ||
Common stock issued | 0 | 0 | 0 | 18,149 | ||
Allocation | ||||||
Goodwill | 14,698 | 14,698 | $ 14,698 | |||
Less: accumulated amortization of acquired intangible assets | (7,388) | (7,388) | (6,443) | |||
Total intangible assets, net | 10,099 | 10,099 | $ 10,913 | |||
Cirrus Technologies, SpeedRoute, And Pro Securities [Member] | ||||||
Purchase Price | ||||||
Cash paid, net of cash acquired | $ 9,353 | |||||
Common stock issued | 18,149 | |||||
Purchase Price | 27,502 | |||||
Allocation | ||||||
Goodwill | 11,914 | 11,914 | 11,914 | |||
Intangibles | 16,000 | 16,000 | 16,000 | 16,000 | 16,000 | |
Accounts receivable and other assets | 2,565 | 2,565 | 2,565 | |||
Other liabilities assumed | (2,977) | (2,977) | (2,977) | |||
Assets acquired and liabilities assumed, net | $ 27,502 | $ 27,502 | $ 27,502 | |||
Less: accumulated amortization of acquired intangible assets | (6,308) | (6,308) | ||||
Total intangible assets, net | 9,692 | 9,692 | ||||
Cirrus Technologies, SpeedRoute, And Pro Securities [Member] | Other | ||||||
Allocation | ||||||
Indefinite-lived intangible assets acquired | 200 | 200 | ||||
Cirrus Technologies, SpeedRoute, And Pro Securities [Member] | Technology and developed software | ||||||
Allocation | ||||||
Finite-lived intangible assets acquired | $ 13,600 | 13,600 | ||||
Useful Life | 4 years 4 months 16 days | |||||
Cirrus Technologies, SpeedRoute, And Pro Securities [Member] | Customer relationships | ||||||
Allocation | ||||||
Finite-lived intangible assets acquired | $ 1,900 | 1,900 | ||||
Useful Life | 0 years | |||||
Cirrus Technologies, SpeedRoute, And Pro Securities [Member] | Trade names | ||||||
Allocation | ||||||
Finite-lived intangible assets acquired | $ 300 | $ 300 | ||||
Useful Life | 7 years 7 months 10 days |
ACCRUED LIABILITIES (Details)
ACCRUED LIABILITIES (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Payables and Accruals [Abstract] | ||
Accrued marketing expenses | $ 20,627 | $ 26,358 |
Accounts payable accruals | 16,865 | 17,229 |
Allowance for returns | 13,537 | 18,176 |
Accrued compensation and other related costs | 11,764 | 8,903 |
Accrued loss contingencies | 9,155 | 9,173 |
Other accrued expenses | 6,176 | 6,315 |
Accrued freight | 3,293 | 10,062 |
Total accrued liabilities | $ 81,417 | $ 96,216 |
BORROWINGS (Details)
BORROWINGS (Details) | Jan. 01, 2017USD ($) | Oct. 24, 2014 | Nov. 30, 2015USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) |
Future principal payments on the Facility | |||||
Long-term debt | $ 43,921,000 | $ 44,179,000 | |||
Long-term debt | 43,921,000 | 44,179,000 | |||
Future payment obligations under capital leases | 0 | ||||
U.S. Bank | |||||
Debt Instrument [Line Items] | |||||
Letters of credit, outstanding amount | 355,000 | 430,000 | |||
Real estate loan and term loan | |||||
Future principal payments on the Facility | |||||
Long-term Debt, Gross | 45,600,000 | ||||
Master Lease Agreement | U.S. Bank Equipment Finance [Member] | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, term | 60 months | ||||
Future principal payments on the Facility | |||||
2017 (Remainder) | 2,439,000 | ||||
2,018 | 3,356,000 | ||||
2,019 | 3,479,000 | ||||
2,020 | 3,502,000 | ||||
2,021 | 1,494,000 | ||||
Thereafter | 0 | ||||
Long-term debt | 14,270,000 | ||||
Termination Period | 12 months | ||||
Capital Leases, Repurchase Option, Amount | $ 1 | ||||
Long-term debt | $ 14,270,000 | ||||
Weighted average interest rate (as a percent) | 3.50% | ||||
Gain (loss) on Master Lease Agreement | 0 | ||||
Maximum borrowing capacity | $ 20,000,000 | ||||
Commercial purchasing card | |||||
Future principal payments on the Facility | |||||
Outstanding balance | $ 904,000 | 811,000 | |||
Unused borrowing capacity | $ 4,100,000 | $ 4,200,000 | |||
Loan Agreement | |||||
Debt Instrument [Line Items] | |||||
Fixed charge coverage ratio, term | 12 months | ||||
Fixed charge coverage ratio | 1.15 | ||||
Cash flow leverage ratio, term | 12 months | ||||
Minimum liquidity | $ 50,000,000 | ||||
Future principal payments on the Facility | |||||
2017 (Remainder) | 843,000 | ||||
2,018 | 1,124,000 | ||||
2,019 | 1,124,000 | ||||
2,020 | 1,124,000 | ||||
2,021 | 1,124,000 | ||||
Thereafter | 40,234,000 | ||||
Long-term debt | 45,573,000 | ||||
Long-term debt | $ 45,573,000 | ||||
Loan Agreement | Following construction phase | |||||
Debt Instrument [Line Items] | |||||
Cash flow leverage ratio | 2.75 | 2.50 | |||
Loan Agreement | Default rate | |||||
Debt Instrument [Line Items] | |||||
Interest rate margin on variable rate basis (as a percent) | 2.00% | ||||
Loan Agreement | Revolving credit facility | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, face amount | $ 25,000,000 | $ 10,000,000 | |||
Maximum amount of stock repurchases allowed under debt covenants | 60,000,000 | ||||
Loan Agreement | Revolving credit facility | LIBOR | |||||
Debt Instrument [Line Items] | |||||
Interest rate margin on variable rate basis (as a percent) | 2.00% | ||||
Loan Agreement | Revolving credit facility | Alternate Base Rate | |||||
Debt Instrument [Line Items] | |||||
Interest rate margin on variable rate basis (as a percent) | 1.00% | ||||
Loan Agreement | Senior secured real estate loan | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, face amount | $ 45,800,000 | ||||
Loan Agreement | Term loan | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, term | 6 years 9 months | ||||
Future principal payments on the Facility | |||||
Long-term Debt, Gross | $ 45,800,000 | ||||
Loan Agreement | Real estate loan and term loan | |||||
Debt Instrument [Line Items] | |||||
Fixed rate following interest rate swap | 4.60% | ||||
Loan Agreement | Real estate loan and term loan | LIBOR | |||||
Debt Instrument [Line Items] | |||||
Interest rate margin on variable rate basis (as a percent) | 2.00% | ||||
Loan Agreement | Real estate loan and term loan | Alternate Base Rate | |||||
Debt Instrument [Line Items] | |||||
Interest rate margin on variable rate basis (as a percent) | 1.00% |
COMMITMENTS AND CONTINGENCIES41
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Future minimum lease payments for all operating leases | ||
2017 (Remainder) | $ 6,406 | |
2,018 | 6,686 | |
2,019 | 6,169 | |
2,020 | 4,056 | |
2,021 | 4,102 | |
Thereafter | 20,411 | |
Total | 47,830 | |
Operating leases | ||
Rental expense for operating leases | $ 2,400 | $ 3,400 |
COMMITMENTS AND CONTINGENCIES42
COMMITMENTS AND CONTINGENCIES (Details 2) | Apr. 28, 2016defendent | Feb. 19, 2014USD ($) | Nov. 17, 2010USD ($) | Sep. 23, 2009defendent | Jun. 30, 2013defendent | Sep. 30, 2008USD ($) | Sep. 30, 2013USD ($) | Sep. 30, 2013USD ($) | Mar. 31, 2017USD ($) |
Loss contingency, legal proceedings | |||||||||
Accrued liabilities for contingencies | $ 9,200,000 | ||||||||
SpeedTrack, Inc. | |||||||||
Loss contingency, legal proceedings | |||||||||
Number of other defendants | defendent | 27 | ||||||||
District attorneys | |||||||||
Loss contingency, legal proceedings | |||||||||
Civil penalties (in dollars per day) | $ 3,500 | $ 2,000 | |||||||
Civil penalties | $ 6,800,000 | ||||||||
Reimbursement of plaintiff legal costs | $ 111,500 | ||||||||
Bond, Percentage Secured Against Civil Penalties | 150.00% | ||||||||
District attorneys | Minimum | |||||||||
Loss contingency, legal proceedings | |||||||||
Damages sought, amount | $ 15,000,000 | ||||||||
William French | |||||||||
Loss contingency, legal proceedings | |||||||||
Number of other defendants | defendent | 46 | ||||||||
State of South Dakota | |||||||||
Loss contingency, legal proceedings | |||||||||
Number of other defendants | defendent | 3 |
STOCK-BASED AWARDS (Details)
STOCK-BASED AWARDS (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Stock-Based Awards | ||
Total stock-based compensation expense (in dollars) | $ 940 | $ 968 |
Units | ||
Outstanding-end of period (in shares) | 585,851 | |
Restricted stock awards | ||
Stock-Based Awards | ||
Vesting period | 3 years | |
Total stock-based compensation expense (in dollars) | $ 940 | $ 968 |
Units | ||
Outstanding-beginning of year (in shares) | 560,000 | |
Granted at fair value (in shares) | 254,000 | |
Vested (in shares) | (143,000) | |
Forfeited (in shares) | (85,000) | |
Outstanding-end of period (in shares) | 586,000 | |
Weighted Average Grant Date Fair Value | ||
Outstanding-beginning of year (in dollars per share) | $ 17.44 | |
Granted at fair value (in dollars per share) | 16.90 | |
Vested (in dollars per share) | 18.54 | |
Forfeited (in dollars per share) | 16.22 | |
Outstanding-end of period (in dollars per share) | $ 17.11 | |
Restricted stock awards | Officers, Board Members, and Employees | ||
Units | ||
Granted at fair value (in shares) | 253,500 | |
Restricted stock awards | First year | ||
Stock-Based Awards | ||
Annual award vesting percentage | 33.30% | |
Restricted stock awards | Second year | ||
Stock-Based Awards | ||
Annual award vesting percentage | 33.30% | |
Restricted stock awards | Third year | ||
Stock-Based Awards | ||
Annual award vesting percentage | 33.30% |
BUSINESS SEGMENTS (Details)
BUSINESS SEGMENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Segment reporting information | ||||
Revenue, net | $ 432,435 | $ 413,677 | ||
Cost of goods sold | 345,528 | 336,370 | ||
Gross profit | 86,907 | 77,307 | ||
Operating expenses | 89,220 | 59,494 | ||
Other income (expense), net | (4,309) | 4,245 | ||
Pre-tax income (loss) | (6,622) | 22,058 | ||
Provision for income taxes | (340) | 8,964 | ||
Consolidated net income (loss) | (6,282) | 13,094 | $ (8,128) | $ 11,766 |
Depreciation of fixed assets | 7,698 | 6,189 | $ 28,792 | $ 24,359 |
Direct | ||||
Segment reporting information | ||||
Revenue, net | 22,828 | 26,651 | ||
Cost of goods sold | 20,963 | 25,406 | ||
Gross profit | 1,865 | 1,245 | ||
Partner | ||||
Segment reporting information | ||||
Revenue, net | 405,261 | 384,269 | ||
Cost of goods sold | 321,297 | 309,297 | ||
Gross profit | 83,964 | 74,972 | ||
Retail Total | ||||
Segment reporting information | ||||
Revenue, net | 428,089 | 410,920 | ||
Cost of goods sold | 342,260 | 334,703 | ||
Gross profit | 85,829 | 76,217 | ||
Operating expenses | 84,538 | 55,380 | ||
Other income (expense), net | 102 | 4,245 | ||
Pre-tax income (loss) | 1,393 | 25,082 | ||
Provision for income taxes | 889 | 10,045 | ||
Consolidated net income (loss) | 504 | 15,037 | ||
Depreciation of fixed assets | 7,400 | 6,200 | ||
Other | ||||
Segment reporting information | ||||
Revenue, net | 4,346 | 2,757 | ||
Cost of goods sold | 3,268 | 1,667 | ||
Gross profit | 1,078 | 1,090 | ||
Operating expenses | 4,682 | 4,114 | ||
Other income (expense), net | (4,411) | 0 | ||
Pre-tax income (loss) | (8,015) | (3,024) | ||
Provision for income taxes | (1,229) | (1,081) | ||
Consolidated net income (loss) | (6,786) | (1,943) | ||
Depreciation of fixed assets | 1,200 | 1,100 | ||
Inter-segment sales or transfers | ||||
Segment reporting information | ||||
Revenue, net | 0 | 0 | ||
Other income (expense), net | $ 306 | $ 155 |
BROKER DEALERS (Details)
BROKER DEALERS (Details) | 3 Months Ended | |
Mar. 31, 2017USD ($)subsidiary | Mar. 31, 2016subsidiary | |
Related Party Transaction [Line Items] | ||
Number of broker-dealer subsidiaries (in subsidiary) | subsidiary | 2 | 2 |
SpeedRoute | ||
Related Party Transaction [Line Items] | ||
Actual net capital | $ 654,608 | |
Amount in excess of required net capital | 516,472 | |
Minimum required net capital | $ 138,136 | |
Net capital ratio (as a percent) | 3.2 | |
Pro Securities | ||
Related Party Transaction [Line Items] | ||
Actual net capital | $ 56,568 | |
Amount in excess of required net capital | 51,568 | |
Minimum required net capital | $ 5,000 | |
Net capital ratio (as a percent) | 0.31 |